Handling the Covicissitudes of Life
“Like all hospitals around the country, Mammoth Hospital has not been immune to the financial impact of COVID-19,” said Melanie Van Winkle, CFO for Mammoth Hospital, in an email to The Sheet.
“In mid-March, we cancelled our elective surgeries/procedures/tests in order to preserve and build our inventory of Personal Protective Equipment (PPE) and prepare our facilities to care for individuals with this virus,” said Van Winkle.
The Hospital also created COVID positive and negative zones and transitioned many clinics to operate remotely.
Tom Parker, Chief Executive Officer for the Hospital, told The Sheet that Mammoth Hospital was effective at this.
“We put together protocols on how to deal with covid-related issues. Another thing we were able to do is increase our PPE (Personal Protective Equipment) in order to handle a surge. Right now our stockpile is at or above 60 days of equipment on hand at surge capacity.”
Parker said the people who are complaining about no real coronavirus wave in Mammoth Lakes are missing the point because a) the hospital would not have been prepared and b) these past few months bought them time to boost the supply stockpile.
“The people [in Mammoth Lakes] have been great. Our community has done a great job at slowing the virus down,” said Parker.
But there has been impact.
According to the American Hospital Association there has been a, “total four-month financial impact of $202.6 billion in losses for America’s hospitals and health systems, or an average of $50.7 billion per month” due to COVID-19.
This estimation spans from March 1 to June 30.
“[Mammoth Hospital has lost] a total of at least $10.7 million,” said Van Winkle, “We were fortunate to receive $6.2 million from the CARES funding to help offset the continued costs of staff and physicians to be ready for any type of patient care needs. So for these first 3 months our net loss is approximately 4.5 million.”
“Collections are running at about half of what they normally are,” said Van Winkle.
Is this cause for concern?
“Yeah, we are concerned,” said Parker before Van Winkle mentioned, “The loss of revenue is concerning because it jeopardizes our ability to provide care.”
Hospitals are currently at the mercy of federal and state orders regarding coronavirus.
The good news: “We have gone into the pandemic with a healthy cash position thanks in large part to Melanie,” said Parker.
“I have been here for 10.5 years. We have been extremely diligent at managing the budget within our means. We have built up a pretty good cash reserve in that time. Thank goodness we had such good results because many hospitals have not had the cash to get through this,” said Van Winkle.
When asked what specifically went into budget management, Van Winkle said that her and her team evaluate staffing based on patient volume and act accordingly. Additionally, the cost of supplies changes rapidly and Van Winkle will negotiate these contracts regularly. This is not an exhaustive list and Parker mentioned the fiscal budget decisions are often a result of “a data driven approach and our benchmarking efforts.”
It was hard to pin down the exact amount of cash in reserves but Van Winkle said it was around $60 million. The hospital district has about $30 million cash for regular operations and $50 million in reserves for capital projects.
Mammoth Hospital, per state regulations, needs to upgrade one of its facilities in accordance with California Earthquake building regulations. Van Winkle said the project could cost “north of $100 million.”
Which explains the capital project reserve stash.
“The deadline [to build the capital improvement project] is 2030. We are putting cash away to fund it but [because of COVID] we don’t quite know the net negative effect yet,” said Van Winkle.
Hospital finances are confusing in general. The payments for services come from several sources; government payers such as Medicare and Medi-Cal, commercial insurance providers and small amounts owed from patients for their co-insurance or deductible amounts. International patients require international payments. Services are always performed in good faith and occasionally payments never come through. All of this makes it impossible to look at a hospital like a normal business.
For the purpose of comparison (to the cash reserves), here are some relevant numbers.
Mammoth Hospital has monthly expenditures of a little over $6 million. This adds up to roughly $72-77 million a year.
These are essentially fixed costs. Most of this covers salaries and benefits.
Without a staff, there is no hospital.
COVID has heavily impacted the revenue side. The month of March saw a $2 million year-over-year dip in revenue.
In April, the Hospital lost almost $6 million of revenue.
In May, the Hospital was short about $2.6 million of revenue.
The losses from these three months and any future losses will be paid from cash reserves.
Any dip into the cash reserves simply makes it more likely that the hospital will have to take on debt in the future.
“These are challenging times for everyone. We at Mammoth Hospital are doing our best to manage our finances prudently so we can be here for years to come for the healthcare needs of our community and visitors,” said Van Winkle.
With COVID cases going up, The Sheet asked Parker if his hospital could weather another shutdown.
“It depends on what is required during that shut down,” said Parker, “The first shut down halted all ‘elective surgeries.” Parker told The Sheet that Mammoth Hospital’s COVID positive and negative zones would ideally allow a different set of operations in the event of a second shut down.
Parker is optimistic this won’t happen again. He thanked the community for distancing, hand-washing and covering up. “We were not overrun because of our community. I just want to show my appreciation for those who took this seriously allowing us to build up our supplies.”