With patient volumes and revenues plummeting, hospital CEOs talk state of Northern Nevada’s healthcare industry
EDITOR’S NOTE: This is the first in a six-part series of stories regarding the business of healthcare in Northern Nevada as part of the NNBW’s special B2B industry focus in October on healthcare. The full series lineup is below:
- Part Two: Experts: COVID fueling stress among Nevada’s already-small physician pool
- Part Three: Senior living company wades through COVID cost impacts as new Reno location opens
- Part Four: The doctor will Zoom you now: Telehealth visits surging in Carson-Reno
- Part Five: Private practice perspective: 4 Reno-Sparks medical businesses discuss impacts, trends during pandemic
- Part Six: Renown, UNR Med working to finalize new ‘destination health’ partnership
It was early January when Alan Garrett, CEO of Carson Tahoe Health, noticed an issue begin to surface. The Carson City-based health network’s stock of personal protective equipment was not as full as usual. Moreover, the flow of new PPE had drastically slowed.
“We saw disruption in our PPE supply chain, so we knew something was happening,” Garrett recalled. “And you’re seeing the stories out of New York and Washington State and then you go, OK, this is real, this is a potential major crisis.”
Two months later, in March, the novel coronavirus outbreak spread across the United States, swiftly shutting states down and slamming the brakes on the nation’s once fast-growing economy.
All the while, in more ways than one, the COVID-19 pandemic began putting heavy strain on the healthcare system across America, including right here in Northern Nevada.
EVAPORATING PATIENT VOLUMES
For years, America’s healthcare industry had a clear roadmap for turning a profit: provide surgeries, scans and other specialty services to privately insured patients, whose plans pay higher prices than public programs like Medicare and Medicaid.
The pandemic, however, has revealed vulnerabilities in that business model. The crisis resulted in millions of canceled procedures — an estimated 28 million elective surgeries worldwide were scrubbed from calendars during the first 12 weeks of peak disruption, according to the World Economic Forum — and led to millions of unemployed Americans losing the health coverage they received at work.
“About 70% of our (patient) volumes evaporated,” said Garrett, who took on the role of CEO in April 2019. “People didn’t want to come to the hospital, and we didn’t want you coming here for surgery if it wasn’t absolutely essential.”
Renown Health, a four-hospital system based in Reno, saw patient volumes drop significantly at the height of the pandemic, said CEO Dr. Anthony Slonim.
“We had a responsibility to shut down a major segment of our operation, which was operating room procedures,” Slonim said. “When you do that, when you just shut down the operations — except for emergencies — that has a financial toll that will take months to years to recover from. It’s not just flipping on a switch.”
And it’s not only the surgery procedures themselves that were paused on a massive scale. Slonim pointed out that all of appointments, tests and “ancillary and extenuating procedures” that allow a doctor to execute a surgery “have fallen by the wayside.”
Seven months into the pandemic, as state regulations have loosened, Slonim said Renown has seen some pent-up demand for doctor visits and elective surgeries, which the Nevada Hospital Association allowed to restart in early May.
“But, we’re still running short of historical volumes, we’re still running behind, if you will, on office visits, OR volume, and emergency department volumes are still down,” he continued. “People are not going to the doctor in the same way that they did. They’re not even accessing more of what some might consider a serious kind of health treatment like they might have before.
“All of that impacts our revenue stream more broadly. And it’s not dissimilar to what others in the industry are seeing.”
BILLIONS IN MONTHLY REVENUE LOSSES
To that end, Saint Mary’s Health Network is also in a “slow recovery,” said Tiffany Coury, who took over as CEO of the network and its 380-bed hospital in downtown Reno in January.
“People still haven’t returned to getting their preventive healthcare or having certain elective cases,” she said. “And so I don’t know that we truly understand the full impact of that.”
Nationwide, hospitals and health systems are reporting an average decline of 19.5% in inpatient volume and 34.5% in outpatient volumes relative to baseline levels, according to the American Hospital Association.
Not to mention, with treating COVID-19 patients, hospitals are spending more on PPE and even increases in certain staffing levels during a period when their most profitable services were put on pause.
Consequently, U.S. hospitals are losing an estimated $20 billion a month right now, per the AHA, which projects total financial losses for the industry to swell to at least $323.1 billion by the end of 2020.
“We’ve increased our labor and we’ve increased our supplies at the same time the revenue has gone down,” Coury said. “You are kind of are getting hit from both ends in some form or fashion.”
Carson Tahoe Health, whose flagship 211-bed hospital is located at 1600 Medical Parkway, hasn’t been immune from the financial fallout.
“Without federal support, it probably knocked 66% of our P&L (profit-and-loss) off, just because of the resources consumed,” Garrett said. “In the middle of it, you don’t know what it’s going to be. We certainly geared up for something worse than it turned out to be (in the region). We never got to the point of being overwhelmed, but we have a responsibility to the community to be ready if it did get to that.”
Still, the health system is down roughly $15 million in net revenue through the first 3 quarters, Garrett said, adding that surgeries are down roughly 15%, ER volumes are down 25% and clinic visits are down 7%.
“We had strong volumes before the pandemic and are seeing ever increasing volumes since the summer,” he said. “… Because we implemented tele-visits so quickly, we were able to serve many patients safely and retain though volumes. It goes without saying, inpatient, surgical and ER visits have an outsize impact on CTH finances. We’re a fiscally conservative organization, so despite the drops we’re still financially stable.
“And because our profits are reinvested in the community as a nonprofit, we’re not subject to the Wall Street pressures other healthcare providers in Nevada may face.”
Meanwhile, as a precaution this spring, Renown even transformed the Mill Street parking structure at its main 808-bed hospital near downtown Reno into a temporary patient care area.
The roughly $11 million project — replete with flooring, electrical infrastructure, wall partitions, lighting, water and WiFi — included 700 beds on one floor, with the capacity to add 700 more on a second floor if needed.
To date, Renown has not had to use the alternative care site to treat patients, a fact Slonim credited to the community as a whole following COVID safety measures.
“As a result of everybody doing their part, we did not see the kind of surge that you would’ve expected based on the numbers and the modeling,” he added.
Still, because of COVID’s impact on the economy, the Nevada Legislature in a July special session approved immense cuts to the state’s health budget as part of an effort to address a projected $1.2 billion revenue shortfall for next fiscal year.
“It’s a big deal,” said Slonim, noting he understands the state’s need to balance the budget. “Any time you’ve got an industry that’s struggling as we’ve been struggling through the pandemic, and then there are additional cuts … these are the same essential services that are needed to care for people.”
Specifically, budget cuts were made to the state’s Medicaid reimbursement rates and specialty care programs.
“That was devastating,” Garrett said. “Medicaid is the worst payer we have and then to cut that funding is very, very difficult.
“We’re not going to turn away a Medicaid patient just because they don’t pay well. That means there’s less money coming in. There’s the same amount of resources going out, we’re using the same technology and supply and labor. That’s really where the crunch is in healthcare, trying to figure out ways to be more affordable.”
Echoing that sentiment, Slonim said that’s a mission Renown has been on since the Affordable Care Act was adopted in 2010.
He pointed to Renown’s Accountable Care Organization (ACO) as a prime example. An ACO is a network of doctors and hospitals that shares financial and medical responsibility for providing coordinated care to patients in hopes of limiting unnecessary spending.
“How do you go about improving quality and reducing costs?” Slonim said. “All of the things that we’re doing are aligned with what we call our ‘journey to value’ — how every day we come to work to make it better to care for people, better services for people … lower cost and more efficiency.”
Along the way, hospitals and health systems in the region are planning for what the post-COVID landscape will look like in the short and long terms, and how the pandemic might reshape everything from demand to delivery models in 2021 and beyond.
“The consumer has changed so much, and I think that started before COVID and has been enhanced,” said Saint Mary’s Coury, pointing to the growing demand and supply of telehealth services throughout the industry. “They want things remotely; they want access to their providers remotely.”
Coury said the industry is also moving toward keeping patients out of hospitals by focusing more on preventative care in recent years to keep people healthy and healed.
“We’re taking more of a preventive approach so that you don’t necessarily need to come to the hospital,” she explained. “You don’t necessarily need to have surgery because we’re doing some of these things like physical therapy that may help your body heal. And thus, you won’t have to have that back surgery, for example.”
“Traditionally, we as an industry have designed a healthcare system to say, come to the hospital and we’ll take care of you,” he said. “Hospitals are in business because people are sick. And while that works, the reality is I would rather figure out a way to stay in business and keep people well.”
Construction could begin next year and require about 500 to 600 workers, with a permanent workforce starting at 150 to 200 people with potential to expand.