D-HH receives millions from federal CARES Act, faces budget shortfall

Valley News Staff Writer
Published: 6/1/2020 9:49:27 PM
Modified: 6/1/2020 9:49:23 PM

LEBANON — Dartmouth-Hitchcock Health received nearly $89 million in CARES Act funding from Washington and tapped tens of millions of dollars in other federal supports to help it weather the initial stages of the COVID-19 pandemic, according to a filing to bondholders last week.

Though the filing only gives a partial picture of the financial impact this spring, the Lebanon-based health care system lost $34.6 million in revenue in the final two weeks of March as the outbreak and subsequent precautions forced Dartmouth-Hitchcock to halt elective and non-urgent procedures.

D-HH was in the red three-quarters of the way through its fiscal year, which ends in June, with an operating loss of more than $46 million through March, largely as a result of the drop in revenue and increase in expenses because of the pandemic.

To date, Dartmouth-Hitchcock, the largest health-care provider in New Hampshire, had said little publicly about the financial impact of the pandemic on its budget, but the filing indicates that it also started to require some employees to take unpaid time off last month. All told, D-H lined up $493 million in federal funding, advance payments, tax deferrals and loans this spring, the filing revealed, more than 20% of its operating budget.

“Like virtually all hospitals and health care systems across the nation, Dartmouth-Hitchcock Health has faced, and is responding to, significant operational and financial challenges relating to the COVID-19 pandemic,” D-H spokesman Rick Adams said in an email on Monday.

In May, D-HH replaced a $100 million line of credit with a three-year, $125 million bank loan with a fixed rate of 2.02%.

In addition, D-HH has benefited from federal programs established to help health care providers during the outbreak. It received $239 million from the Centers for Medicare & Medicaid Services Accelerated and Advance Payment Program in April; $88.6 million in CARES Act stimulus funds in April and May; and $40 million in payroll tax deferrals expected to continue through December, the filing reported.

The CARES Act funding that D-H received represents about 31% of the $285 million in CARES Act support that state officials last month said went to New Hampshire hospitals.

Although D-HH continued to pay all its employees through May 4, the filing noted that the impact on its staff had been “significant.” Some workers whose regular jobs in elective procedures were on pause were reassigned.

On May 4, employees who were unable to be reassigned were asked to either used accrued earned time and or take unpaid time off, an effective furlough.

That same day, the hospital system began reopening and rescheduling procedures and visits that had been postponed.

“Thinking in the longer term, it was clear that the demand for our (specialty) care services will continue and will grow post-pandemic, and employees will be needed to meet that need,” the May 27 filing, signed by D-H CFO Daniel Jantzen, stated.

About 5,000 employees who do not work directly with patients are working remotely and “plans are being developed to analyze and implement remote work as an ongoing staffing model even after the COVID pandemic has passed,” the filing said.

Hospitals across the country are also tightening their belts. The University of Vermont Health Network, which includes six hospitals in Vermont and upstate New York, announced on May 1 that it would lose more than $150 million in revenue through its fiscal year, which ends in September, because of the pandemic. The UVM Health Network has received $70 million in federal CARES Act funding, thus far, according to spokeswoman Annie Mackin.

And last week, the UVM Medical Center in Burlington said it had furloughed 450 workers but had not made any permanent job cuts, the Burlington Free Press reported.

Compared to the first three quarters of 2019, D-HH’s revenues were actually up $71.4 million, or about 4%, to $1.77 billion through March.

But that fell far short of covering the organization’s expenses, which went up $162.3 million or nearly 10%, to $1.81 billion.

Driving the increases in cost were total compensation including benefits, medical supplies and medications, purchased services, payment for traveling staff members, planned pay increases, and increased health plan enrollment and claims.

On the revenue side, D-H saw increases from the prior year in services provided to patients through the beginning of March until visits and surgeries dropped steeply due to the pandemic.

D-H was already facing financial pressures going into the pandemic from reductions in pay rates from some governmental insurers, an increase in patients covered by Medicare or Medicaid rather than commercial insurance providers, which generally pay higher rates for services, according to the filing. It also was seeing a shift in inpatient admissions from surgical to medical, which resulted in lower payments per discharge.

One bright spot in the system’s revenue picture was continued growth in its specialty pharmacy program, which saw growth of $61.1 million, or more than 67% over the first three quarters of the prior year.

The health system issued two sets of bonds in October 2019 and January 2020, totaling $290.3 million, to fund the construction of two expansion projects. Underway is a $62.5 million expansion at D-H’s ambulatory clinic in Manchester, which is now expected to be completed early next year.

In addition, Dartmouth-Hitchcock Medical Center got the green light from the Lebanon Planning Board last week to move forward with its $150 million project to construct a new patient tower on its campus. Construction is planned to begin in July, with completion scheduled for fall of 2022.

“Funding for this inpatient expansion had been secured prior to the onset of the pandemic, and although the timeline may shift slightly as the impacts of COVID are fully realized, the project will proceed as planned,” the filing said.

To continue to see patients and bring in some money during the pandemic, Dartmouth-Hitchcock has dramatically increased telemedicine appointments for primary care and non-procedure visits using phone and video technology, going from about 10 per day prior to the pandemic to nearly 2,000.

“Telehealth will continue to be an integral part of how we deliver health care,” Dr. Kevin Curtis, medical director of D-H’s Center for Telehealth and Connected Care, said in a Zoom roundtable with U.S. Sen. Maggie Hassan, D-N.H., last week.

Telehealth appointments might make the most sense even after the pandemic, especially for those who live far from the hospital, Curtis said. But Curtis, who also emphasized that “those people who need to come to the facility still can without being concerned” about being exposed to the coronavirus.

DHMC and other D-HH member hospitals in recent weeks have reopened services that had been halted when the pandemic first hit.

For example, Dartmouth-Hitchcock’s Lyme clinic reopened for in-person visits last week after being closed since late March, according to a Friday Listserv post from Dr. Cheri Mather, who practices there.

In the first two weeks of May, D-H began to see increases in clinic visits and surgeries, the filing said.

“We continue to believe that, despite the expected financial impacts of the pandemic, D-HH is better positioned than many health systems across the nation to weather this storm, and the early results of our clinical recovery work show great promise,” Adams said in his Monday email.

Nora Doyle-Burr can be reached at ndoyleburr@vnews.com or 603-727-3213.

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