Rural hospitals fear funding will dry up

Credit: Curtis Compton

Credit: Curtis Compton

Over the summer months, Angela Ammons bought a large mobile health clinic to be ready for the overflow of COVID-19 patients who could seek care in her emergency room at Clinch Memorial Hospital.

Now, it’s November and the trailer is still in a box in a storage shed in the back of the Homerville facility. The CEO hasn’t wanted to open it because she wasn’t sure it would be considered an allowable expense under the Coronavirus Aid, Relief and Economic Security or CARES.

Federal guidance under the Act has been changing, creating a lot of headaches, Ammons said. Months ago, early guidance permitted the purchase. Then, in September, she was told she could only be compensated for the trailer’s depreciation costs.

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“There is so much out of our control,’' Ammons said early this month. “We would have never spent $30,000 of our money had I known I would not be able to use federal funding and get credit for it.”

Now, just days ago, the guidance was reversed, she said. “We are thankful.”

The CARES Act provided a financial lifeline to thousands of rural hospitals across the U.S. as they battled the impact of the pandemic earlier this year. “It bought them some time,” said state Rep. Terry England, R-Auburn, a member of the state’s rural stabilization committee, which is looking for ways to bring solid financial footing to struggling rural facilities.

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But some Georgia hospital officials say that uncertainty over federal reimbursements, as well as an unanticipated spate of local funding cuts, are now posing a threat to their hospitals’ continued survival.

They worry that recent guidance from the federal government means that some expenses are not reimbursable, and that federal money may dry up just as they are facing a winter resurgence in cases and additional expenses related to potential vaccines.

“I think (federal funding) has helped them weather the worst. The question is will this help them weather another three months, another six months,” said Michael Topchik, national leader for The Chartis Group, a healthcare consultant with offices in Atlanta.

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Meanwhile, mindful of the relief funds that have poured in from the federal government, a few Georgia counties are looking to cut back on financial support for rural hospitals.

After Elbert Memorial Hospital had piled up a mountain of debt and almost closed a few years ago, county officials had provided financial assistance of up to $1 million a year. Today, leaders say, as a result of an infusion of approximately $5 million in federal funds, the hospital is in better financial condition than ever.

So they voted to end the assistance and shift resources to long-neglected areas, like salary hikes for public safety employees and capital improvements.

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"We wanted to give a boost to them to stop the bleeding and try to retain our employees,'' Elbert County Commission Chairman Lee Vaughn told the AJC.

If the hospital later finds itself in a bind, "we will find the money,'' Vaughn said. “Under no circumstances will we allow our hospital to close. We know how very important to our community it is. Nobody wants to see it close.”

‘Take the money back’

Several rural CEOs told the AJC months ago that they had been hesitant to draw on the federal relief money because of the strings attached, fearing they would eventually have to return the money. Hospitals had to certify that they were complying with all terms and conditions that came with the dollars, though the rules were often broad-brush.

Then the rules changed in mid-September. Revised guidelines from the federal government provided more detailed instructions on how provider relief funds could be expended. Among the significant changes, only expenses remaining after all other eligible funding sources have been exhausted may be considered as reimbursable expenses. The new guidance also had a required order for allocating funds and a new methodology for calculating and reporting lost revenues.

“Under no circumstances will we allow our hospital to close. We know how very important to our community it is. Nobody wants to see it close."

- Elbert County Commission Chairman Lee Vaughn

The federal government “wanted to get the money out very, very quickly back in the spring,” said Karyn Schwartz, a senior fellow at the Kaiser Family Foundation in Washington, D.C.. “Since then, they’ve been adjusting the terms and conditions. For an entity that is receiving the money, this could be kind of scary.”

At least $30 billion more in federal relief dollars are to flow to healthcare providers by year’s end, Schwartz said. But it is unclear how much of that will go to support rural safety-net providers.

“There is still a good amount of money left,” Schwartz said.

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Another concern is that rural hospitals may have to purchase special freezers to store vaccines but won’t have the money to buy the equipment if the federal government will only support depreciation costs for capital equipment, Schwartz said.

Ammons said she is worried that she won’t have the resources to deliver care with cases rising in her county, especially if the government orders her to send back millions of dollars in advanced payments. Since the outbreak, Clinch County has reported a total of 482 confirmed cases and 13 deaths out of a total population of less than 7,000, records show.

"So many hospitals spent money on preceding guidelines,'' Ammons said. “A lot are going to have to shut their doors if the government tries to take the money back.”

The federal government also advanced Medicare payments to hospitals to help with cash flow problems, with the provision that the money would eventually have to be paid back. Recently, however, the government loosened the repayment requirements after lobbying from provider advocacy groups and feedback from congressional leaders.

‘Fat cats’

This fall, Elbert Memorial Hospital CEO Kerry Trapnell said he asked for $400,000 from the county, rather than up to $1 million as he had requested in the past. But the county denied the funding, telling him that he could approach the county later if caught in a bind.

But by then, Trapnell said, it could be too late. Costs for supplies and equipment are on the rise and could quickly eat up revenues, he said. He’s also worried that some of the federal cash advances he received will have to be returned. In addition, the hospital is performing far fewer elective surgeries, which represent the bulk of its revenue.

Credit: Curtis Compton

Credit: Curtis Compton

Another problem that could come up is that he will be short on staff and will have to recruit or try to obtain staff from other parts of the state, which could be more costly. The school system is already discussing the possibility of closing after Thanksgiving. If that happens, many hospital staff with children will need babysitting support, he said. The hospital is now paying a monthly fee to the local church to save room "in case our staff needs babysitting,'' he said.

"If we come to you for a loan to make payroll, it’s too late,'' Trapnell said. “One payment is not going to help us at the last minute.”

As of mid-November, Elbert County had 844 confirmed cases and 14 deaths, state health records showed.

Other Georgia hospitals early on thought they finally had resources they needed, with federal dollars filling gaps.

That’s why healthcare officials in Evans County, about 60 miles south of Elberton, asked the county in May to stop a subsidy.

“They said they didn’t feel right because their financial position had changed to be requesting more money from the taxpayers,” Evans County Administrator Casey Burkhalter told the AJC.

Such moves are ones that rural officials may come to regret, others say.

“Somebody obviously believes that rural hospitals are a bunch of fat cats,” said Topchik, the healthcare consultant.

Jimmy Lewis, chief executive officer for HomeTown Health, an advocacy group for Georgia rural hospitals, agrees.

In some cases, Lewis said, “it’s been short-sighted.”

Nationwide, rural facilities have been closing at record pace in the past decade. So far, Georgia has witnessed nine closures since 2010, records show.

Healthcare consultants who advise hospital leaders urge them to emphasize to elected officials the economic impact of a hospital closure and the subsequent loss of jobs and revenue for the community.

“Where we see these relationships being really successful is when the local government is seeing the investments they’re making reflect the further financial sustainability for that hospital,” said Sarah Gaskell, associate director of healthcare strategy at healthcare consultant Guidehouse.