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COVID-19 has clinical and financial implications for Iowa hospitals

Rightfully, most attention now is on the front-line care Iowa hospitals are providing for patients stricken with COVID-19. Yet, it’s the financial repercussions of this pandemic that may be more threatening to the future of Iowa hospitals. Collectively, Iowa hospitals could lose more than $1.4 billion through September, according to financial modeling by CliftonLarsonAllen, a well-known audit and consulting firm.

Although Congress has provided stimulus and relief funding, the $550 million that has been received by Iowa hospitals will on average help support their operations for 45-60 days and will not be enough to close the fiscal gap many are facing because of COVID-19.

Iowa hospitals on average lost half of their gross revenue in the pandemic’s first six weeks. As a group, it’s an estimated $12 million net loss per day from mid-March to late April. Much of that is because of the suspension of elective procedures. Although COVID-19 treatment comes at a substantial cost to hospitals, it’s been this elective-procedure interruption that has caused the most damage to hospitals’ financials.

For rural Iowa hospitals, it’s another blow to an already fragile financial reality. A study conducted more than a year before COVID-19’s emergence found 17 Iowa hospitals at high risk for closing. Rural hospitals also rely on outpatient services to provide most of their revenue. Nearly 80% of rural hospitals’ services are outpatient-based and most elective cases are outpatient procedures. Even with elective procedures resuming, modeling shows it will take more than a year for hospitals to recover from the lost revenue.

The growing possibility of rural hospitals in Iowa closing could leave some of the state’s most-vulnerable citizens in limbo without adequate health care access.

The state’s major health care systems are not immune to the pandemic’s affects either. They have instituted pay cuts, furloughs and layoffs, adding to an already deep and growing unemployment crisis. Although better prepared now than several weeks ago, Iowa’s urban hospitals are seeing higher percentages of COVID-19 patients and will continue negative financial operations for many months as they bring back other essential services and work to preserve capacity for more COVID-19 hospitalizations.

A recent economic report released by the Iowa Hospital Association highlights Iowa hospitals’ role in supporting the state’s vitality by generating more than 143,000 jobs in 2019 that added nearly $7.9 billion to the state’s economy.

The closure of an Iowa hospital means the loss of access to health care for patients, the loss of an important economic engine for the region and the loss of an essential driver of a community’s quality of life.

Proper funding is needed to offset the major financial losses Iowa’s hospitals have incurred during this pandemic. When lawmakers reconvene in June, they must move forward with measures and decisions that support the institutions that have been at the front line – Iowa hospitals.

Marty Guthmiller is CEO of Orange City Area Health System in Orange City, Iowa. He is also chair of the Iowa Hospital Association’s board of directors and trustees. He can be reached at guthmilm@ochealthsystem.org.

David Stark is CEO of UnityPoint Health – Des Moines. He is also a member of the Iowa Hospital Association’s board of directors and trustees. He can be reached at david.stark@unitypoint.org.

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