Trinity Heath anticipates $2 billion in losses and further layoffs as COVID-19 continues

Trinity Health, a 92-hospital nonprofit health system based in Michigan, said it expects to suffer revenue losses in the vicinity of $2 billion in fiscal year 2021, which begins today, owing to the prolonged and lasting effects of the COVID-19 pandemic.

In bondholder documents filed this week, the system acknowledged its finances began taking a serious hit around mid-March, and this is causing ripple effects, coloring the system's financial forecast well into next year -- at least until a vaccine is ready, and patient volumes return to their pre-pandemic baseline.

WHAT'S THE IMPACT

Trinity is forecasting operating revenue of about $17 billion, down from the expected $19 billion. In response, the system said it was pursuing cost-cutting measures that include eliminating positions, laying off employees and extending furloughs and scaled-back working hours, though it declined to release numbers. This is in addition to the 2,500 furloughs the organization announced in April.

There have been preliminary signs of slightly improved performance. According to the filing, the number of severely sick COVID-19 patients has been declining, and there has been a small but steady rebound in inpatient and outpatient business. The system said it has developed plans to rebuild its volumes, but at this point, many unknowns remain.

While the federal government has provided financial support in the form of the CARES Act -- of which Trinity received a chunk -- the health system said the funding doesn't cover operating losses incurred as a result of the pandemic. Aside from the projection of FY2021 revenues, the system balked at making specific predictions beyond that, saying it's impossible to know at this point the long-term direct financial impact of the pandemic on operating and cash flow margins.

Staffing changes, including furloughs, layoffs and staff reductions, will be handled on a case-by-case basis across the system based on factors such as volume growth projections and the cost and revenue challenges in each market, the system said.

Trinity has drawn on credit facilities totaling $1 billion to provide adequate liquidity during the pandemic, and will continue to assess its liquidity position.

THE LARGER TREND

When it became evident that the COVID-19 pandemic would spread across the U.S., lawmakers, scientists and healthcare leaders sought to predict what the financial and operational impact on hospitals would be. In those early days, policymakers relied on data from China, where the pandemic originated.

Now, with the benefit of time, the early predictions seriously underestimated the coronavirus' impacts. In early June, University of California Berkeley and Kaiser Permanente researchers determined that certain factors -- such as how many patients would need treatment in intensive care units, average length of stay and fatality risk -- are much worse than previously anticipated, and put a much greater strain on hospital resources.

The considerable length of stay among COVID patients suggests that unmitigated transmission of the virus could threaten hospital capacity as it has in hotspots such as New York and Italy. Social distancing measures have acted as a stop-gap in reducing transmission and protecting health systems, but the authors said hospitals would do well to ensure capacity in the coming months in a manner that's responsive to changes in social distancing measures.

A new report from the American Hospital Association estimates an additional $120.5 billion in financial losses from July through December due to lower patient volumes. These estimates are in addition to the $202.6 billion in losses between March and June, according to the AHA in a report released last month. This brings total losses for the nation's hospitals and health systems to at least $323.1 billion in 2020.

Twitter: @JELagasse
Email the writer: jeff.lagasse@himssmedia.com