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March 30, 2020

COVID-19 promises to wreak havoc on hospital budgets

HBJ Photo | Matt Pilon Bristol Hospital CEO Kurt Barwis (right) with board Chairman Glenn Heiser in March 2019.

As the COVID-19 coronavirus continues to spread across Connecticut, Bristol Health is losing out on millions of dollars in revenue and ramping up spending in crucial areas as it prepares for an expected surge in patients.

The independent, one-hospital system has furloughed 33 non-clinical employees and temporarily reduced the hours of approximately 270 others, including clinical personnel, according to its CEO Kurt Barwis.

“We are literally cutting to the bone,” Barwis told bond investors on a call last week.

The reduction is needed because Bristol, like many other hospitals have done at the behest of federal regulators during the ongoing pandemic, has postponed or canceled numerous elective procedures over the past month.

As a result, the hospital’s inpatient census has plummeted and procedure volumes have fallen by about half.

That’s expected to cost Bristol Health, which booked $197.5 million in patient revenue last year, upwards of $8 million per month, Barwis said.

“Cashflow-wise, we’re going to struggle,” Barwis said on the March 24 call.

In an interview Friday with HBJ, Barwis stressed that he will keep the workers he needs to deal with a wave of COVID-19 patients expected to hit within the next few weeks.

“I don’t want anyone to think I’m shedding staff I need during this crisis, I am not,” Barwis said.

Other hospitals have disclosed anticipated coronavirus-related financial hits, including UConn Health, which said last week that it could miss out on $100 million in revenue this year due to a drop in procedure volume.

Hospital overseers, including at Bristol and Yale New Haven Health, are drawing on lines of credit, and Yale last week signaled that COVID-19 could affect the late summer construction timing of an $838 million neuroscience center at its St. Raphael campus.

“At this time, YNHHS is focusing on its preparedness for the COVID-19 pandemic,” the disclosure read. “YNHHS will evaluate current and planned capital expenditures as appropriate.”

Update: Monday evening, the Connecticut Hospital Association estimated the monthly cumulative revenue loss for Connecticut's hospitals at upwards of $400 million.  

Photo | Contributed
Bristol Hospital's 60,000-square-foot ambulatory care center at the corner of Main Street and Riverside Avenue in Bristol.

Surge, stimulus, surgery backlog

As Bristol Health works to deal with the unexpected dent in its finances, one key question for Barwis is how much of the lost revenue his system might recover.

Pre-pandemic, Bristol Health had been budgeting a $3.5-million loss for its fiscal year that ends Sept. 30, and Barwis said it’s far too complicated to accurately update that guidance yet.

“It’s too hard to guess at our losses now,” he said.

The coming surge will bring more patient revenue into hospitals.

Another major factor is the CARES Act, which Congress approved late last week. The $2-trillion stimulus package contains $100 billion for hospitals as well as a double-digit increase in Medicare reimbursements for hospitals treating COVID-19 patients.

Barwis isn’t yet sure what his hospital might get in stimulus funding.

“The relief bill looks phenomenal, but the devil is in the details,” he said.

On the back end of the surge, there will be a backlog of postponed surgeries and procedures.

Surgeons are preparing to work extra hours when the time comes.

“My surgeons are telling me the volume they are delaying they believe will stay,” Barwis said. "Those cases aren’t going to go away, they’re going to get rescheduled.”

COVID-19 stymies fiscal turnaround 

Bristol Health booked a larger-than-expected operating loss of nearly $11 million last fiscal year, which was one of the reasons Barwis had a call with bond investors last week.

Barwis said significant adjustments to the health system’s “revenue cycle,” or accounts receivable, were needed after an audit.

Barwis said his team has made various improvements and may ultimately outsource is revenue-cycle management.

Procedure volumes in January and February were up and things looked promising.

“Everything was looking great and then, all of the sudden, everything comes to a screeching halt,” Barwis said.

While the financial fallout from the pandemic remains to be seen, Barwis said he’s glad about one key decision management made last summer.

Bristol Health used bond funding to “de-risk” its pension plan, taking the funds out the market and replacing the defined-benefit plan with annuities contracts.

Falling interest rates and stock market declines in recent weeks would likely have made the deal not feasible. 

Barwis called the pension transaction “the smartest move we could have made.”

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