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Health & Science

Houston Hospitals Are Struggling Financially Amid COVID-19

Public and private hospitals are both struggling with their finances as COVID-19 stresses the system and cuts off important revenue streams.

Houston Methodist Hospital in the Texas Medical Center, on  July 24, 2019.
Macie Kelly / Houston Public Media

As COVID-19 case counts remain high and health care workers fight to save lives, Houston hospitals face an additional problem: the financial impacts of an economic downturn during a pandemic.

Public safety net hospitals like the Harris Health System, which operates the Ben Taub and Lyndon B Johnson hospitals, are primarily funded by taxes and governmental reimbursement. Only one-third of their revenue comes from patient services, according to Dr. Esmaeil Porsa, CEO of The Harris Health System.

Porsa said his hospitals have lost an average of roughly $10 million dollars a month since the end of March. But it isn't just due to the reduction in revenue from the number of outpatient visits, he said — it's mostly been an increase in costs for personal protective equipment and other things.

"That's all supply services, additional labor, additional PPE costs," Porsa said.

In order to offset these losses, Houston hospitals are relying on money from the federal government. For the Harris Health System, every future dollar received will go back into providing more services for their patients, Porsa said.

It’s not just public hospitals that are feeling the crunch. Houston Methodist, a private hospital, is seeing a loss in overall revenue during COVID-19 caused by a significant decrease in surgeries, which has reduced the number of patients in their hospitals recovering from non-coronavirus related illnesses, according to Marc Boom, Houston Methodist Hospital CEO.

"The way hospital economics work for most private hospitals, is that surgical volumes tend to pay essentially better than medical admissions do,” Boom said. “We were down probably about 80% through the end of March and through the month of April on the outpatient surgical volume. And we were down 45% or so on in-patient surgical volume."

Inpatient surgeries are more urgently needed, but many were suspended during the shutdown back in March and April. Boom said his hospitals spent much of May and June catching up on care for those patients who had to delay their surgeries.

Emergency room visits have declined dramatically at Houston Methodist, along with office visits. Many necessary diagnostic and therapeutic activities have been delayed.

The combination has led to a major loss in yearly revenue, Boom said.

"For us, through June, our revenue's were off about $316 million dollars from what we would have expected,” Boom said. “The vast majority of that happening in the March, April and May timeframe.”

Outside of the revenue loss, Houston Methodist has spent $45 million dollars so far this year on personal protective equipment that they would not have spent if there wasn't a pandemic. An additional $20-$25 million dollars was spent on diagnostic equipment and building out additional units to care for patients.

Memorial Hermann Health System hospitals have had more than 7,000 COVID-19 patients admitted to their hospitals. They received $163 million dollars through the CARES Act, $96 million of which was related to lost Medicare revenue, according to a statement from the hospital system.

Houston Methodist has had to use federal funds from the first CARES Act to not only help with the additional PPE costs, but also blunt the significant blow they've taken from a lack of surgeries.

"That has been very, very helpful,” Boom said. “There's been a fair amount, but it is really a fraction of the financial impact."

The federal government has also provided area hospitals with "hotspot funding." Houston Methodist received these payments in early May and July because of the uptick in COVID patients.

Despite the financial blows, hospitals are still functioning across the board at the Texas Medical Center. One fear among executives, though, is that people are afraid to get care because of the presence of COVID-19 in hospitals.

Over the last few weeks, the Houston Health Department has routinely reminded the public that hospitals are safe, and there are enough ambulances to take you there.

"We have specific units that cohort patients with COVID,” Boom said. “So there's not a concern or fear that you're going to come to the hospital and somehow be interacting with people infected with COVID. You will be cared for very, very safely."