COVID-19 Spikes In Rural Areas, Where Hospitals Face Financial Struggle

Oct 20, 2020

One by one, COVID-19 outbreaks popped up in April and May at meatpacking plants across the country, fanning fears that the infectious coronavirus could spread rapidly into rural states. Plants closed temporarily in small metro areas such as Sioux Falls, South Dakota, and Waterloo, Iowa, and in smaller towns like Iowa’s Columbus Junction and Perry

As June began, southwest Missouri's Jasper County started reporting a jump in COVID-19 cases at a Butterball poultry plant in Carthage. Then, almost 500 workers tested positive for the virus at several Tyson Foods facilities in northwest Arkansas, about 80 miles away. 

“If you go on down into the northwest Arkansas area, many of the hospitals down in those areas are starting to become overwhelmed, so that could potentially affect our hospital capacity here,” Jasper County Health Director Tony Moehr said during the infection peak in June.

Leaders at Buena Vista Regional Medical Center in Storm Lake, a northwest Iowa town of 10,500 with a Tyson Foods packing plant, knew their time would come. “We just didn’t know to what degree,” said Rob Colerick, the hospital CEO. “I mean, you saw it in Columbus Junction. You saw it in Waterloo. You saw it in Sioux Falls. Certainly, the dynamics were present to have a similar situation here.”

What Colerick and other rural hospital administrators in the United States knew was that they had entered the pandemic last spring facing financial crises so extreme that hospital closings were a real possibility in small towns across the nation. 

Most of those at risk were at designated critical access hospitals, small hospitals with 25 or fewer general care beds that people in rural areas depend on for accessible health care. The American Hospital Association estimates that 57 million Americans depend on these hospitals. Beyond the health benefits, hospitals make a rural community economically attractive for both businesses and residents.

Three out of every four of the nation’s critical access hospitals had negative operating incomes going into the pandemic, according to an analysis by a collaboration of news outlets that are members of the Institute for Nonprofit News: Side Effects Public Media, IowaWatch, Wisconsin Watch, and Reveal from The Center for Investigative Reporting. The main reason: It costs more to treat people than insurance and patients pay for that care.

The national operating income rate has worsened, from 69% of critical access hospitals running with negative income in 2015 to 75% in 2019, the analysis showed. 

Compounding the problem, hospitals focusing on handling the pandemic last spring canceled nonemergency medical procedures that would have produced much needed income.

Federal aid that hospitals received from the Coronavirus Aid, Relief and Economic Security Act and the Paycheck Protection Program filled some of this year’s funding gap. So did advance Medicare payments for the roughly 60% of the nation’s hospitals willing to comply with rules attached to paying back the advances.

The cash boost was so substantial that some hospital leaders in the Midwest said in interviews that they had stronger income this past summer than in summer 2019. But the infusion was only a temporary lifeline, not the permanent fix hospital industry leaders say is needed, most likely from the federal government, to keep some critical access hospitals from closing. 

“The subsidy, the support helped to keep them afloat for a couple months,” said Mark Holmes, director of the University of North Carolina’s Cecil G. Sheps Center for Health Services Research, which keeps tabs on hospitals at risk of closing because of financial hardship.

“But eventually, there comes a time,” Holmes said of at-risk hospitals. “And a very common experience is by Wednesday night, they realize they can’t make payroll on Friday. So it’s often a pretty short window when these things are announced. I think that’s going to be the type of pattern that we see.”

That scenario could happen within a year at hospitals that entered 2020 already on shaky financial ground without more federal funding, he said. Moreover, infection rates are rising in several rural states. 

Reveal · The impact of COVID-19 on rural hospitals in Indiana

Wisconsin had 264 patients with COVID-19 in intensive care on Oct. 15, the state’s Department of Health Services reported. It already needed more ICU beds than it had available for a surge that could require 750 ICU beds for COVID-19 by mid-November, University of Washington researchers predict. 

The news collaboration’s analysis of hospital funding comes as COVID-19 is surging in several states with significant rural populations. Overall, more than 217,000 people have died from the virus in the United States. The Centers for Disease Control and Prevention says it does not keep a running tally of how many of these deaths were in rural areas, but Johns Hopkins University researchers following the CDC’s county-by-county data show that some of the nation’s hot spots for COVID-19 deaths per capita are in rural areas

Arkansas and South Dakota are among rural states the researchers predict will be out of ICU beds for COVID-19 patients – within a few days in South Dakota and as soon as late October in Arkansas. Montana, they said, could be short beds in January.

Nebraska, Kansas, Missouri, Indiana and Iowa could fill most, if not all, of their ICU beds around the December holidays, the researchers predicted.

“It’s hard to imagine us coming back with any type of cheery disposition to say, ‘Oh, wow, we turned a corner,’” said Michael Topchik, national leader for the private rural hospital assessment firm Chartis Center for Rural Health. “You’ll continue to see more hospital closures.”

The closures could be catastrophic for small towns because they also tend to be the largest or second-largest employer, Topchik said. “All of Main Street shutters as soon as one of these rural hospitals close.

“You’re talking Dust Bowl stuff. You’re talking, you know, tumbleweeds-going-through-the-streets-type stuff when that happens. So I think the cost is far greater than you think.”

Temporary fixes 

In the U.S., 132 rural hospitals have closed since 2010, including 15 this year, the Cecil G. Sheps Center for Health Services Research reports in its database of hospitals at risk. 

Credit Graph the University of North Carolina's Cecil G. Sheps Center for Health Services Research.

Meanwhile, the CARES Act has pumped $175 billion into the nation’s hospitals, clinics, medical practices, cities and other entities treating and testing for COVID-19, a share of which reached rural hospitals. Stimulus money provided an additional $10 billion specifically for rural hospitals and $1 billion for specialty rural hospitals, which are suburban hospitals that provide health care primarily to rural areas and which operate on small margins.

Health care and social assistance programs, including some rural hospitals, also collected a total of $67.4 billion in Paycheck Protection Program money, the Small Business Administration reported.

Two out of five critical access hospitals in the country lost money after nonpatient revenue was added to their ledgers in the last fiscal year for which reports exist. They received an average of $3.7 million each in CARES Act funding, according to interviews and analysis of Health and Human Services data from July and hospital financial data from the American Hospital Directory.  

One-third of the nation’s critical access hospitals earned enough to report net income gains of more than $1 million in their last fiscal year; these facilities received, on average, $4.5 million from CARES Act funding. CARES Act funding amounts were based on formulas that include previous income and, in some cases, Medicare billings. 

Hospitals also were eligible for $92 billion in accelerated and advance Medicare payments. 

The Medicare payments must be paid back to the Centers for Medicare & Medicaid Services. Critical access hospitals originally had to start paying back that money in Medicare credits one year after receiving the first advances in April and May, but large hospitals had to start 120 days after receiving it. That would have been now for the large hospitals, but Congress stretched the period for all hospitals to as much as 29 months in the September appropriations resolution that kept the federal government open until Dec. 11. That resolution also dropped the interest rate for overdue repayment from 10.25% to 4%.

Industry groups, including the American Hospital Association and Federation of American Hospitals, have sought forgiveness for the payments. 

The Genesis Health System, a 17-county, 75-location operation in eastern Iowa and western Illinois, collected more money than it spent heading out of summer at its three critical access hospitals. Curt Coleman, Genesis’ president of critical access hospitals, said the facilities had been on track to lose up to $1.5 million per hospital from April through June after canceling nonemergency clinical procedures. 

Genesis hospital leaders started meeting in mid-March and continued to do so nearly nonstop through April with one topic: COVID-19, Coleman said. During that time, they learned along with the general public not only how the disease spread, but also how best and where to screen people coming into Genesis’ facilities, how often to screen, when to require face masks and how to staff for dealing with COVID-19. As summer came and went, hospital leaders believed they had a better grip on treating the virus than they did in March, he said. Federal government stimulus money helped tremendously.

“It’s just a bit ironic that it took a pandemic to really provide some additional stimulus and support for hospitals that were losing money on a normal business day,” Coleman said. “And it took a pandemic and it took some stimulus to kind of stabilize that out.”

The CARES Act gave each hospital amounts ranging from $300,000 to $350,000 in April and another $3.4 million to $3.6 million in the second wave of stimulus money for rural hospitals. When one of them, Jackson County Regional Health Center in Maquoketa, Iowa, qualified for another $1.5 million from the Paycheck Protection Program, it could cover three months of salaries, Coleman said.

“So COVID actually was, from a financial standpoint, helpful to us,” he said. “The last thing I think you want as a society is your health care system to be uncertain about its future in a time of a pandemic, especially when you’re being asked to slow things down for the good of your community.” 

Two of every five critical access hospitals in the country that the news collaborators studied lost money even when nonpatient revenue – aid from foundations, bequests, gift shop sales and the federal government – was added.

Federal aid at Door County Medical Center in Sturgeon Bay, Wisconsin, not only offset a $10 million revenue gap between March 18 and May 31, but it gave the hospital a stronger June financially than it had in 2019, CEO Brian Stephens said.

Door County received $6.9 million in CARES Act money and was eligible for up to $8 million in accelerated and advanced Medicare payments. It had reported net income for the fiscal year ending June 30, 2019, but needed revenue from sources that included investment income, bequests and fundraising events to do it.

The hospital took advantage of the stimulus money to prepare for COVID-19 and a feared surge in patients with the virus by stopping elective procedures and surgery, and most of its face-to-face clinic visits. “Fortunately, that surge hasn’t occurred to this point, but we had the opportunity to set up new patient care areas, to cross-train staff, do a lot of things that we wouldn’t have had the ability to do had we not slowed down our services in those areas,” Stephens said. 

Problems multiply near meatpacking plants

Nearly 1 of every 10 residents in Buena Vista County, Iowa – which includes Storm Lake, where Tyson Foods has a pork processing plant – has tested positive for COVID-19. As of mid-October, 12 had died, Iowa’s state-run coronavirus database shows. Four were from the packing plant, said Art Cullen, editor of The Storm Lake Times. The state and county will not say how many deaths were at the plant.

The county’s surge started in late May and continued until early July. “We were just knee-deep in COVID here,” said Pam Bogue, the county public health administrator. 

By mid-October, more than 2,100 people had tested positive for the coronavirus in her county – half of them ages 18 to 40 – and 10 to 20 new positive tests were coming in daily. “It’s a bump,” she said of the recent cases, adding, “it’s not as bad as it was Memorial Day.”

Mark Holmes, at the North Carolina rural health research center, said the danger is that COVID-19 spreads beyond confined places like a meatpacking plant, a nursing home or a prison. 

“The prison guards go home at night,” he said. “The nursing home workers may have a second job or go out to eat, go to a grocery store. And the food processing employees live with other people who are also moving. So the infection in any three of these is going to lead to something that can be spread as well.”

Rob Colerick, CEO of Buena Vista Regional Medical Center, said roughly 7 of every 10 county residents testing positive for COVID-19 as of mid-October went to his hospital. The rest went to specialty care out of town.

Colerick said Buena Vista had enough beds to handle the surge because managers prepared in March and adapted. “I hate to say ‘hurry up and wait,’ but you saw what was happening around the country and kind of tweaked things as you went."

Getting $7.6 million in CARES Act funding and additional Paycheck Protection Program money helped the hospital pay its normal bills when funding from procedures canceled at the end of March stopped coming in. The hospital had ended fiscal 2019, with a negative 9.2% operating margin. But nonpatient revenue allowed the hospital to report overall net income of a little more than $1 million going into the pandemic year, financial records show. 

The hospital’s census is back to normal this fall, Colerick said. “From a management standpoint, it certainly puts new meaning to the term ‘change management,’” he said about dealing with COVID-19. “You’re sometimes changing by the hour. … In my career, I don’t think we’ve ever managed anything that changed as quickly as this did.”

Hospitals using stimulus money

Thin margins meant small hospitals have had to be creative. 

The 25-bed Union Hospital Clinton in Clinton, Indiana, already faced the challenges of being in a hospital desert along the Illinois border when COVID-19 started to make things worse. 

“I told my staff, there’s not very many things that keep me up at night,” said Stephanie Laws, the hospital’s administrator. “But being able to provide a paycheck and a wage for the over 125 employees that call this organization home to their jobs and their work is very important, very important to me.”

Union Hospital Clinton is among the fortunate. Connected to the larger Union Hospital in Terre Haute, it operated in the black from 2014 through 2018, the last five years for which its financial data are on file, and had a 15.1% operating margin for 2018. 

Union Hospital Clinton took no accelerated Medicare payments, but received part of $28.9 million in CARES Act dollars sent to the Union network, which parceled out the money to affiliates. The Clinton hospital has avoided, to date, a big COVID-19 outbreak.

“I’m encouraged, yet despaired,” Laws said. “You really don’t know what to expect, really. I mean, everything changes on a dime.”

While pandemic-related funding helped rural hospitals get through the summer, the bigger questions about their stability deal with finding long-term solutions, industry leaders and analysts and hospital administrators said in interviews. 

“What happens when we’re no longer in a pandemic?” Genesis’ Coleman asked. “How do we fix this reimbursement, the reimbursement issue for our hospitals, and help them become sustainable? I certainly think Medicare can play a role on that. Medicaid, the state can play a role in that. I would like to see our commercial insurance carriers play a role on that because they’re all contributing to the problem now.” 

Michael Topchik, of the Chartis Center for Rural Health, said he expects hospitals’ financial struggles to get worse as COVID-19 progresses. “COVID absolutely was a curveball,” he said. He said the federal government needs creative legislation that gives rural hospitals more long-term financial stability.

Topchik said rural hospitals need something big, on par with creating the critical access hospitals designation in the 1997 Balanced Budget Act, or the 1946 Hill-Burton Act that established ways to give health care to people who cannot afford it. Without that, “you’re going to continue seeing the erosion of the safety net,” he said.

“You’re going to have this division in society of the haves and the have-nots. The urban versus rural divide will get wider. And it’s very, very difficult to maintain a quality of life in a rural area if you don’t have modern, quality health care at an affordable price.”

This story was originally published by Reveal from The Center for Investigative Reporting, a nonprofit news organization based in the San Francisco Bay Area. Learn more at revealnews.org and subscribe to the Reveal podcast, produced with PRX, at revealnews.org/podcast.

This story was produced as part of a multi-newsroom collaboration by Institute for Nonprofit News members  Side Effects Public Media, IowaWatch, Wisconsin Watch and Reveal from The Center for Investigative Reporting. You can read more stories from the collaboration here.

Coburn Dukehart and Parker Schorr of Wisconsin Watch and Carter Barrett and Sebastián Martínez Valdivia of Side Effects Public Media contributed reporting. Frank Bass contributed data analysis for Reveal. This story was edited by Sumi Aggarwal and Esther Kaplan of Reveal and copy edited by Nikki Frick of Reveal.

Lyle Muller of IowaWatch can be reached at lyle-muller@iowawatch.org. Follow him on Twitter: @LyleMuller