The economic impact of the COVID-19 pandemic has been staggering throughout all industries – locally as well as globally. We are facing an unprecedented time which has created fear and uncertainty regarding our future and business viability. Industry shutdowns due to stay-at-home orders have indeed helped to flatten the curve and build healthcare capacity but have come at the cost of halting economic growth. Although at the center of the COVID-19 pandemic, the healthcare industry has not been immune to this economic downturn. In addition to the clinical strain brought on by COVID-19, the order to delay all elective procedures in Minnesota, effective March 21 through May 11, coupled with reducing preventative clinic visits, unfortunately created an additional economic strain to many healthcare systems.
The intent and purpose of the elective procedure delay order is well-understood and supported in the healthcare industry, as it protected our more vulnerable population and allowed facilities time to build inventories of protective equipment for future COVID-19 surges. However, the financial impact was significant and can’t be ignored, estimated at nearly $31 million dollars of lost revenue per day for all systems combined across Minnesota.
Looking at the impact on a more rural level, the numbers are smaller, but it can be argued the impact was proportionately larger. The approximately 1,800 rural facilities across the nation were faced with not only decreasing volumes but increasing preparation costs on top of strained cash flow and depleted budgets. In addition, many rural facilities have been financially struggling under normal conditions, let alone pandemic conditions. Twenty percent of Americans live in rural areas and depend on their local hospital for care. In Minnesota, this number is nearly double, with 39% of the population living in rural areas, much like Staples, MN. In the past ten years, the future of rural healthcare has entered the spotlight with 120 rural facilities closing their doors, three of which have been in Minnesota. Due to these dismal statistics, the future of many rural systems is in question as we look to move forward and recover from COVID-19.
Bringing the focus local and looking specifically at the impact to Lakewood Health System, the impact has been significant. During the elective procedure shut down, surgical volumes neared zero while also experiencing 50%-60% decreases in clinic visit volume. Fortunately, where Lakewood differs from many struggling rural facilities, is we have a conservative approach to the overall financials and have always had a focus of saving for a rainy day. With that said, no amount of planning could have prepared any organization for the impacts of COVID-19, but the reserves in place gave Lakewood the funds to allow for rapid planning and implementation of operational changes, such as staffing adjustments, to offset the significant volume reductions. The reserves also allowed Lakewood to bridge the gap to Federal and State relief funding that ultimately came forward.
The financial projections for Lakewood from late April vary significantly with the projections of today. The initial projections forecasted minimal volumes throughout the summer as well as no known relief funding. However, over the past month, with the elective surgical order lifted, we have experienced gradually increasing volumes across the system. This volume has not only allowed our financials to move towards normal, the volume has also allowed us to start the return to our normal staffing levels by recalling employees back from voluntary furlough. Looking at the annual forecast for the remainder of the year, the outlook is more promising. Gradually increasing volumes, operational changes, and federal and state relief funds have officially moved Lakewood out of the red. While Lakewood is out of the red, we do recognize we are not out of the woods and must now move the focus onto recovery mode.
Recovering from this pandemic means adapting to a new norm. Going into the downturn with a financial reserve allowed Lakewood to sustain. However, Lakewood’s strong clinical position and supportive community will allow us to recover. Lakewood is quickly adapting to this new norm and has been working diligently to ensure our patients are safe and clinical needs are addressed. Lakewood is not solely focusing on recovery, as we are simultaneously preparing for the unknown and the potential surges we may experience in upcoming months. We continue to separate our clinics with “sick” (COVID-like symptoms and illness) and “well” areas (preventative care and management of ongoing medical conditions) to limit risk of exposure, in addition to always wearing and providing the appropriate protective equipment. For our patients who are unable or not ready to come in, we have also implemented telehealth visits and continue to grow the capabilities across various areas of our system. On top of changing care delivery models, Lakewood is continually monitoring COVID conditions to ensure the safety of our patients, residents, providers and employees while allowing us to meet the needs of our patients.
Lakewood’s commitment to our community remains stronger than ever and ultimately, we will fully recover from this pandemic, adapt to our new norm and continue to provide quality, personalized healthcare for a lifetime, together.
Chief Finance Officer
Lakewood Health System