News

Rural hospitals sound code blue on finances

By Julie Havlak, Carolina Journal News Service, Published: April 15, 2020

RALEIGH — Lawmakers shifted their focus away from the coronavirus surge for the first time during the Tuesday, April 14, meeting of the House Committee on COVID-19 Health Care Working Group.

Legislators focused on the damage the pandemic is wreaking on the infrastructure of the state’s health care system. The virus has drained revenue from urban and rural hospitals, imperiled the finances of health insurers, and triggered a potential surge of behavioral health problems in counties grappling with shortages of behavioral health care providers.

Rural hospitals across the state are losing $145 million a month. Most of that loss, some $118 million, comes from canceled non-urgent elective procedures. Hospitals spent another $13 million on supplies and labor and $14 million on other expenses associated with the virus, says Dr. Roxie Wells, president of Cape Fear Valley Hoke Hospital.

The cost of past hurricanes pales beside the economic toll of the virus, Wells said.

“I have grave concerns for the survival of the state’s rural hospitals,” Wells said. “The uncertainty has led to a level of preparation that is unprecedented in cost and has left most hospitals, especially rural hospitals that were already financially fragile, in dire straits.”

Wells wants to use rural hospitals to treat non-coronavirus patients and low-level cases of the virus. Rural hospitals canceled elective procedures to prepare for the surge of coronavirus hospitalizations. But, some say if rural hospitals don’t see a surge, revenue will fall still lower than their urban counterparts.

“I know that rural hospitals were already in peril before this crisis. Those that were breaking even are now in the red, with no sign of recovery,” Wells said.

Health insurers are worried about their finances. COVID-19 could cost health insurers $251 billion in the U.S. commercial market. That’s more than the capital and surplus held by the entire industry in 2018, said Ken Lewis, N.C. Association of Health Plans executive director.

Some major insurers agreed to cover the costs of COVID-19 testing and treatment, waiving member co-pays, deductibles, and cost-sharing until June. But the virus has shrunk their revenue and forced some members to drop coverage. In North Carolina, some major insurers already lost tens of millions to the budget stalemate and delays in Medicaid managed care.

“The solvency of health insurers is critical,” Lewis said. "But our resources are finite.”

Behavioral health providers say lawmakers should expect a surge of mental health and substance use disorders because of the pandemic and social distancing measures.

The surge could catch the state unprepared. Not all behavioral health providers have the resources to shift to telemedicine, said Dr. Sy Saeed, N.C. Statewide Telepsychiatry Program director.

“Local mental health and addiction centers are likely to basically shut down their business,” Saeed said. “There is no other alternative to them. We need to make sure that people have resources.”

North Carolina had a shortage of behavioral health care workers for years. The state had just 1.01 psychiatric physicians per 10,000 residents in 2018. Almost all the state’s counties qualify as health care professional shortage areas under federal standards, and 31 counties had no psychiatrists at all.

“We were in semi-crisis mode before COVID-19, and it’s likely to get worse unless we prepare for the aftermath of this epidemic,” said Saeed. “The time for dealing with that is now. … We know telemental health is a viable and reasonable option for providing care to those who are currently underserved.”

The N.C. Department of Health and Human Services has also freed funds for the behavioral health managed care companies that run its Medicaid program. MCOs can now use up to 15% of their risk reserve, and the state is giving MCOs a 1.5% increase in Medicaid rates.

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