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Dartmouth-Hitchcock Health takes out $125 million loan

Valley News Staff Writer
Published: 5/23/2020 9:10:37 PM
Modified: 5/23/2020 9:10:35 PM

LEBANON — Dartmouth-Hitchcock Health took out a $125 million bank loan earlier this month to increase its access to cash as the COVID-19 crisis impacts hospitals’ finances.

The Lebanon-based health system, which last year had an operating budget of $2.2 billion, is striving to make up for revenue lost from halting non-urgent and elective procedures to prepare for a surge of COVID-19 patients. Though they have recently begun to reopen more services, the losses are likely to continue.

And Dartmouth-Hitchcock is not alone. Claremont-based Valley Regional Hospital, for example, has seen a steep drop in revenue, according to its CEO, as have others in the Upper Valley.

Dartmouth-Hitchcock Health — which includes Dartmouth-Hitchcock Medical Center; Cheshire Medical Center in Keene, N.H.; Mt. Ascutney Hospital and Health Center in Windsor; New London Hospital; and Alice Peck Day Memorial Hospital in Lebanon — took out a $100 million line of credit in late March, amid the uncertainties of the COVID crisis, said Dan Jantzen, D-HH’s chief financial officer, in an email.

That was well above the line of credit the health system has maintained in recent years that has allowed it to take out up to $30 million at one time.

But even that wasn’t enough

“Out of an abundance of caution,” Jantzen said, the health system opted to terminate the line of credit and take out a $125 million loan with a three-year term and a 2.02% interest rate through an agreement dated May 15 that was provided to bondholders. D-HH has the option to pay it off sooner without penalty.

D-HH CEO Joanne Conroy told employees in a March email that it had “become clear that we will not be able to achieve our $65.9 million (3.3%) budgeted Operating Margin for FY20.”

Hospitals across New Hampshire have seen revenues reduced by about 50%, for a loss of more than $200 million each month, according to the New Hampshire Hospital Association. Similarly in Vermont, hospitals are seeing a loss of about $130 million each month, about half of that at the University of Vermont Medical Center in Burlington, according to the Vermont Association of Hospitals & Health Systems.

“These losses are simply unsustainable,” said Vanessa Stafford, spokeswoman for the New Hampshire Hospital Association.

Federal and state support

Hospitals are making up for these losses, at least in part, through a mix of grants and loans from state and federal governments. In March, New Hampshire Gov. Chris Sununu established a $50 million emergency fund for health care providers around the state. This month, the state added $50 million to that fund, though it said $30 million will go to long-term care providers.

Hospitals also have received money through the federal CARES Act, the Health Care Protection Act and the Paycheck Protection Program, for those with 500 or fewer employees.

According to D-HH’s loan agreement, its members received a total of $239.4 million in federal loans in the form of advanced Medicare payments during the month of April.

A partial tally provided by the Vermont hospital association indicates that Vermont hospitals have so far received more than $275 million in loans and grants. Of that, Gifford Medical Center in Randolph has received $12.1 million, Mt. Ascutney has gotten $9 million, and Springfield (Vt.) Hospital has gotten $5.2 million.

Working from home on Friday, Valley Regional Hospital CEO Deanna Howard said she didn’t have numbers in terms of how much the Claremont hospital has received in relief money, but she said it’s made a difference.

“We needed those funds to carry our folks as long as we have,” she said.

The hospital, which has roughly 350 employees, has so far avoided layoffs. It furloughed 15 employees, who went unpaid but retained their benefits. Howard said that in most cases the furloughed employees volunteered because they needed time off to care for children or for health reasons.

In addition, Valley Regional encouraged people with earned time off to take it while the hospital was less busy, Howard said. It also redeployed people to other jobs, aiming to keep them at the same pay level, she said.

These changes haven’t cut costs, she said.

“We took a bit of a gamble in thinking we would get enough money to carry us through,” she said. “That experiment is still underway. (It’d be) nice if we got another allocation.”

Vermont hospitals have worked to manage their costs, said Mike Del Trecco, CFO of the Vermont hospital association. They’ve done so through layoffs, furloughs and cuts to benefits and pay, as well as delays in capital projects and purchases, he said.

But on the other side of the balance sheet, hospitals have incurred unexpected expenses to prepare for COVID-19, such as purchasing personal protective equipment, adding beds and creating zero-pressure rooms, Del Trecco said.

Many rural hospitals around the country and in the Twin States were struggling before the COVID-19 crisis. Coming into it, at least half of Vermont’s hospitals had small or negative margins, Jeffrey Tieman, the Vermont hospital association’s CEO, said in an email. As a result, they’re going to need additional money to get through it.

“The next several months will require constant monitoring as conditions change, as well as thoughtful state and federal support to ensure the vitality of hospitals and the entire health care system,” Tieman said.

Looking ahead

Mt. Ascutney was aiming for a break-even budget this year, but does not expect to make it, CEO Joseph Perras said in a Friday email. Federal funding has helped, but is “certainly not enough to sustain operations without the return of our patients and procedures.”

Mt. Ascutney will look to manage expenses and bring back patients to clinics, operating rooms and inpatient units as it recovers from the pandemic over the next 12 months, he said.

“Working with D-HH system leaders, each member has set goals for fiscal and clinical recovery and we are working tightly as a System to achieve them,” Perras said.

Many hospitals around New Hampshire will find themselves running out of cash in two to three months without additional state and federal money, said Stafford, of the New Hampshire Hospital Association.

“Hospitals are going to need immediate financial relief in order to continue serving their patients and communities today and into the future,” she said.

Howard said revenue at Valley Regional is down 50% due to the COVID-19 response effort.

“There’s just no way you can make that up,” she said.

Though Valley Regional has begun reopening services that had been on pause since March, the hospital won’t be able to return to its normal volumes for some time. Employees are still adjusting to the “new normal” of performing their work while wearing protective gear, adding testing for COVID-19 to their pre-operation to-do lists and leaving extra time for cleaning operating rooms, which means they will perform fewer procedures per day, she said.

Hospitals also are contending with unpredictability as they plan for the future. For example, Howard said, she never knows what will arrive when she places an order for personal protective equipment such as masks.

“It might be there, might not,” she said. It “might be half of what you expected.”

Without sufficient gear to protect workers, surgeries might have to be rescheduled, she said.

Before the outbreak, Valley Regional was meeting or doing better than its budget for the year, which has made it “not quite as frightening as it would have been” otherwise.

But, she added, “nobody’s out of the woods yet.”

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




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