‘Dramatic for every hospital’: Lexington Medical loses $18M in March due to COVID-19

Lexington Medical Center lost $18 million in March as it cut down on surgeries in order to focus on the COVID-19 pandemic, and hospital finances likely took an even worse hit in April, CEO Tod Augsburger said this week.

“I don’t know what that forecast looks like yet, but it wouldn’t surprise me if that doubles” to a more than 35% drop in monthly revenue for April, he said in an exclusive interview with The State.

It was just a few days into March that the West Columbia hospital first confirmed that a patient in its emergency department tested positive for the COVID-19 virus. As the virus spread in South Carolina, health care facilities scrambled to find the resources they needed.

On March 17, S.C. Gov. Henry McMaster asked the state’s hospitals to prepare for virus patients by stopping elective procedures — the non-emergency surgeries that make up a large chunk of hospitals’ revenue.

“It’s dramatic for every hospital,” Augsburger said. “In America, whether you like it or not, commercially insured patients that have elective procedures or surgical procedures help pay the bills for those who don’t have insurance.”

As doctors and nurses and other health care professionals have rushed to respond to the public health crisis, many hospitals are feeling the financial strain that’s already swept through other parts of the economy, like hospitality and tourism. And at a time when the United States is leaning on hospitals like Lexington Medical Center to help it rein in the outbreak, the hospital is trying to balance COVID-19 care with preparing for the uncertainty ahead.

The first step, Augsburger said, is gradually and safely resuming time-sensitive procedures, such as cancer care and heart surgery. Over the past seven weeks, physicians have made difficult decisions about delaying patient care, Chief Medical Officer Brent Powers said in an exclusive interview with The State.

“We’re all trying to meet the needs that we know are waiting for us, and we’re trying to prioritize that without putting patients at risk,” he said. “And everyone’s struggling with that.”

The hospitals’ network of 78 practices across the Midlands never fully closed, but some specialists saw patient numbers dwindle to a fraction of what they used to be, Augsburger said, even with increased telemedicine appointments.

“If you were a surgeon, your volumes went to 10-20% or so, depending on your specialty. Some specialties went to zero,” he said. “But again, they never all closed, they’re just ramping back up.”

On average, Lexington Medical Center performs about 100 surgeries a day. On April 27, there were just 40 procedures scheduled, according to Augsburger.

When it comes to financing in the American health care system, well-paying surgical procedures help bring in the money hospitals need to stay afloat, said Dr. Emerson Smith, a health care researcher and professor.

“They have to build revenue, particularly in these times, and so they go after the most expensive procedures,” he said. “They get a lot of money doing any cancer surgery, or even just chemotherapy.”

Lexington Medical Center’s saving grace, at least for the time being, is its rainy day fund, Augsburger said. He said he thinks the hospital can get through the fiscal uncertainty without making cuts to its 7,000-employee workforce or enacting furloughs. Other health care providers in the state, such as Prisma Health and the Medical University of South Carolina, have laid off or furloughed staff in order to make up for the revenue losses.

Compared to other health care systems, and especially to struggling rural hospitals, Lexington Medical Center entered the crisis well-heeled, Smith said.

Between October 2018 and March 2019, the hospital made $16 million strictly from its investments, according to financial statements — a significant source of income, Smith said.

“Lexington is doing very well and does have the ability — as you expect they would — the ability to take a hit. How big a hit they can take without losing that investment income is something else,” he said.

The hospital also received $20 million from the federal government through the CARES Act, a relief bill meant to mitigate the damaging effects of the pandemic. The payment was based on the percentage of Medicare patients a hospital had, according to Augsburger.

But the fiscal toll will likely be larger than what a government check can cover, Smith said.

Even once hospitals resume all elective procedures, some patients could rethink spending the money in their shrunken pocketbooks on high-dollar, nonessential procedures. More than 400,000 South Carolinians have lost their jobs since the beginning of March, according to the state Department of Employment and Workforce.

A lack of spending on health care services is one of the primary reasons the nation’s economy will contract in early 2020, according to estimates in an advance report published this week by the U.S. Department of Commerce’s Bureau of Economic Analysis.

Other patients might still be hesitant to go to a hospital where COVID-19 patients are for fear of getting sick, Smith said. Lexington Medical Center will need to balance caring for future virus patients — Augsburger foresees cases increasing in coming weeks as the state moves to reopen its economy — with more profitable treatments, according to Smith.

However, the subsequent COVID-19 waves some scientists predict are coming could throw those plans off-course for hospitals, Smith said. The hospitals may need to pull back again on non-emergency surgeries, which could deal a blow to finances in the long-term, he said.

On top of those concerns, hospitals need help covering the money they spent in order to contain COVID-19, from investing in additional ventilators to buying marked-up personal protective equipment and seeking out testing kits.

At Lexington Medical Center, hospital administrators spent $575,000 just on purchasing and leasing ventilators, which can cost $35,000 a piece, Augsburger said. The hospital went from ordering 2,000 N95 masks per month to ordering 50,000 in the past six weeks, according to a hospital spokesperson.

In order to be ready for the next major outbreak of COVID-19 or another illness, health care facilities will need to build up their stockpile of resources, Augsburger said.

“I think we’re gonna live in this world for quite some time, a year, two years. I don’t think it’ll be likely that this goes away completely,” he said.

Preparing for the long-haul takes money.

Smith said he foresees the relationship between health care and government changing as a result of the COVID-19 outbreak in South Carolina. Not even a well-funded hospital like Lexington Medical Center is assured to get through COVID-19 unscathed, he said.

“What does the future hold for us to assure that Lexington Medical Center will have the ability to continue providing the good services they do provide? Are they going to depend more on the federal government or do they feel like they can hold out and get by without that? I don’t think they can,” Smith said.

This story was originally published May 1, 2020 at 10:21 AM with the headline "‘Dramatic for every hospital’: Lexington Medical loses $18M in March due to COVID-19."