Bret Jackson, president of the Economic Alliance for Michigan, said he is concerned that hospitals will use the COVID-19 related revenue losses to pass along higher costs to employers. Another concern is that the money hospitals have received from the CARES Act will be used to purchase struggling physician practices or expand health care operations.
"It was important for Congress to support these facilities and medical groups that were restricted from taking care of patients," Jackson said. "What I am concerned how they will cover the lost revenue and that somehow the employer community will be the target of hyper-inflation of prices."
Executives at Beaumont, Henry Ford and Trinity Health told Crain's that none of the funds received by federal or state sources will be used to purchase struggling physician practices, hospitals or otherwise used to expand market shares in inpatient or outpatient areas. The CARES Act did not directly prohibit such business moves.
But there are questions whether the systems needed to furlough or lay off as many employees and health care workers as they did. By a Crain's analysis, more than 10,000 health care workers, including doctors and nurses were furloughed or laid off in Southeast Michigan shortly after the federal funding bills were approved.
Officials at Beaumont, Henry Ford and Trinity Health said they made the right calls in furloughing employees and staff as many health care services were drastically scaled back and patient care declined by more than half. They said they needed to reduce expenses because funding for the relief bills were weeks away from reaching their bank accounts.
"Even though our revenue went down 50 percent in the state of Michigan, we furloughed only 10 percent of our workforce (of 28,000 employees in early April). So we did not match dollar for dollar at all," said Rob Casalou, president of the Michigan, Georgia and Florida markets with Trinity Health, a Livonia-based system of 93 hospitals.
Health care experts interviewed by Crain's also say national hospital association lobbying efforts are underway to ask Congress to forgive the $2.4 billion in advanced Medicare payments given to the 10 Michigan health systems. Overall, Michigan hospitals received about $2.94 billion of the total $78.4 billion nationally, said CMS.
Casalou said he favors either complete loan forgiveness or another round of financial grants for hospitals.
"We bore the brunt of this pandemic and the medical costs side," Casalou said. "We did it by giving up all of our other work and we ended up losing hundreds of billions of dollars in the process. We are looking toward the government for help in that regard and the bills that they passed so far. And that's inadequate in our in our estimation."
Casalou said it would be easier for Congress to simply forgive the Medicare advanced payments received already by the health systems since the funding has been distributed. He said he also worries about a second wave of COVID-19 this fall.
"If they just forgive them, they don't have to then generate another bill with another tranche and then figure out how to distribute it," he said. "It would absolutely put us in much stronger shape in terms of being able to weather and being able to come out of this."
So far, Casalou said Trinity Health Michigan has received far $132 million in grant funding. Federal data shows Trinity Michigan will receive $165 million with the state of Michigan kicking in another $2.7 million in relief funds. The Catholic system also received $219.5 in Medicare pre-payments.
"We didn't use it for any other purpose than to pay the expenses that we needed to incur as well as to offset lost revenue," said Casalou. "We put a halt on all of our capital spending in everything to conserve cash."
Casalou said Trinity Michigan also received an additional amount of funds because Congress deferred a 2 percent Medicare cut related to sequestration and a 20 percent add-on to Medicare patient reimbursement who had COVID-19. "That is helpful, although I assume it is temporary," he said.
Henry Ford received a total of $39 million from Medicare for other COVID-19 relief funding, including sequestration cuts and Medicare payment boosts, Damschroder said.
During the first two months of the pandemic, Trinity Health Michigan experienced a 50 percent drop in patient activity, resulting in an operating loss of $50 million in March and an $84 million loss in April.
As of mid-June, Trinity Michigan hospitals treated 1,986 patients with 428 deaths, far fewer than Beaumont, which treated 8,049 patients with 906 deaths.
In May, Trinity Michigan lost another $53 million, counting the money saved with the furloughed workers. By June 30, the end of Trinity's 2020 fiscal year, the system projects to drop another $20 million even with patients starting to return for a four-month loss of $207 million on operations.
"We were $75 million ahead (going into the third quarter ending March 30), but we lost all that. Without (the federal grant and loan money) we would be deep into the red," said Casalou, adding he expects Trinity Michigan to post a net loss for fiscal 2020.
But Casalou said Trinity expects to break even during the three-month period ending in September 30 and for the first six months of fiscal 2021 by Dec. 31 be in the black.
"We will try to recover as much of our volume as we can and with some restructuring and watching our expenses we plan to be in the black for fiscal 2021," Casalou said. "Starting next January through June (2021) we hopefully will be closer to our normal. ... If they forgive our loans, that would definitely put us in the black."