Michigan hospitals expecting losses despite $850M in federal aid

Seven large Michigan health systems have received more than $850 million in federal aid for treating a large number of COVID-19 patients, according to NPR affiliate Michigan Radio. But that aid falls short of what is needed to remain unscathed, according to the health systems.

Despite receiving $136 million in federal relief aid, Ann Arbor-based Michigan Medicine said it will end the 2020 fiscal year with an operating loss.

Michigan Medicine had projected a positive operating margin of $175 million in the fiscal year ended June 30, but now it expects a $3 million operating loss on $4.7 billion in revenue for the 12-month period because of the pandemic. 

Revenue dropped significantly in March and April after it suspended elective procedures, Michigan Medicine said. 

To help offset the revenue losses, the health system has laid off 738 employees, cut executive pay and suspended merit raises, employer retirement matches and tuition reimbursement. The health system will also reduce supply, consulting and discretionary expenses and delay capital projects.

Michigan Medicine is not the only hospital system in the state that is anticipating losses and making cuts to help offset them. 

Detroit-based Henry Ford Health System received $182.4 million in high-impact funds, according to the report, but the system anticipates losing $500 million in revenue by the end of June due to COVID-19.

Stimulus funding falls short of covering all losses at Livonia, Mich.-based Trinity Health as well. As a result, Trinity Health announced plans this week to lay off and reduce work schedules of 1,000 employees because it is still "losing millions of dollars per day."

The new round of cuts come after Trinity announced plans in April to furlough 2,500 employees. 

Chas Roades, co-founder and CEO of Gist Healthcare, a Washington, D.C.-based advisory firm, told Michigan Radio that federal funding is estimated to backfill about 40 percent to 50 percent of the losses for health systems. As a result, they will continue to implement cuts.

"Almost every health system I talk to will have a loss at the end of this year," Mr. Roades told Michigan Radio. 

More articles on healthcare finance: 
Trinity Health furloughs, lays off another 1,000 workers
Saint Luke's Health System to close Kansas hospital
Elective surgery pause in Texas is bad credit news for hospital operators

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