Becker's Hospital Review

22 CFO / FINANCE 'It will take several years to fully recover': Sutter to begin sweeping review of finances By Alia Paavola S acramento, Calif.-based Sutter Health called 2020 one of the "toughest finan- cial years" in the organization's 100-year history and said March 4 it will begin a sweeping review of its finances. "Sutter's costs exceeded revenue, and such a trajectory seems unsustainable, partic- ularly as both COVID and the healthcare industry's structural challenges will re- main for the foreseeable future. As such, Sutter has begun a sweeping review of its operations and finances," Sutter Health said in a March 4 news release about its financial results. Sutter said its financial review will include restructuring and closing some programs and services and redeploying staff to different departments with higher patient volume. Sutter Health President and CEO Sarah Krev- ans said it will take several years for the health system to recover from the financial effects of the COVID-19 pandemic. "We invested heavily to respond to the pan- demic because it was the right thing to do, but it came at a cost, as we experienced one of the toughest financial years in Sutter's 100-year history," Ms. Krevans said. "It will take several years to fully recover. We will take the neces- sary steps to make our operations sustainable, while continuing to provide high-quality care and keep our patients, clinicians and commu- nities safe." In the year ended Dec. 31, Sutter recorded an operating loss of $321 million in 2020, which the health system attributed to care disrup- tions and increased expenses due to the pan- demic. In 2019, Sutter posted a $548 million operating loss, which it said was due to a large antitrust settlement. Sutter Health recorded an operating revenue of $13.2 billion in 2020, down from $13.3 billion recorded in 2019. Although Sutter's expenses decreased more than 2 percent to $13.5 bil- lion in 2020, the health system's expenses still outweighed revenue. Overall for the year, Sutter ended the period with $134 million in net income, which was attributed to investment gains. n COVID-19 could cause up to $122B hit to hospital revenue in 2021, study finds By Alia Paavola T he COVID-19 pandemic could cause hospitals to lose as much as $122 billion this year, according to a February study from healthcare consulting firm Kaufman Hall. The study, commissioned by the American Hospital Association, sought to understand COVID-19's effect on hospital finances. For the report, Kaufman Hall used historical hospital revenues and mod- eled different recovery factors to forecast 2021 hospital revenue. According to the study, under a scenario in which there is a partial recovery of volumes, slow vaccine progress and cycli- cal COVID-19 surges, U.S. hospitals could lose $122 billion in revenue. This would include $64 billion in lost outpatient revenue, $41 billion in lost inpatient revenue and $17 billion in lost emergen- cy department revenue. But under a scenario in which there is consistent recovery of pa- tient volumes, quick vaccine progress and a sustained decrease in COVID-19 cases, hospitals could face $53 billion in total revenue losses in 2021. This would include a $27 billion loss in outpatient revenue, $17 billion in inpatient revenue and $9 billion in emergen- cy department revenue, according to the report. "Whether recovery from COVID-19 in 2021 is relatively rapid or rel- atively slow, America's hospitals will face another year of struggle to regain their financial health while providing necessary care and services to a nation that is continuing to experience the effects of an unprecedented pandemic," Kaufman Hall said. n Tennessee hospital abruptly closes By Ayla Ellison J ellico (Tenn.) Medical Center closed March 1, days after the city council voted to send a contract termination notice to the hospi- tal's operator, Rennova Health, according to TV station WBIR. The hospital, owned by the city, has not admit- ted a patient since November and often doesn't have enough staff to provide adequate patient care, city attorney Elizabeth Burrell told TV sta- tion WATE. She said West Palm Beach, Fla.- based Rennova has breached its contract by not operating Jellico Medical Center as an acute care hospital, according to WBIR. Rennova management said the city council's contract termination decision left the company with no option but to close the hospital. "Repercussions of the decision made by the City of Jellico at last week's public board meeting mean it is no longer viable for Rennova Health, Inc. to consider the financial support or invest- ment needed for Jellico hospital to continue to operate in any capacity on a daily basis," Renno- va said in a March 2 statement to WVLT. Rennova CEO Seamus Lagan said the hospital needs significant investments of about $500,000 for upgrades, and the city council is aware of de- ficiencies at the hospital. n

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