How COVID-19 threatens healthcare in Chicago county


Chicago’s county public health system faces a financial reckoning as COVID-19 drives up costs and drains revenue.

Two-hospital Cook County Health was under pressure before the pandemic to cut spending and address a rising burden of uncompensated care without a permanent leader. Now $30 million behind budget, the system is grappling with increased costs like employee overtime and shrinking revenues due to fewer nonemergency surgeries and routine appointments.

A plan is underway to bring down the projected $61 million deficit for fiscal year 2020, with officials late last month eliminating 70 positions through a mix of layoffs and cutting vacant jobs. If costs and patient volumes don’t improve, and federal funds stop flowing, the system could end up with a $187 million deficit next fiscal year.

“We are basically projecting what we believe to be the worst-case scenario,” interim CEO Debra Carey said. “We are definitely seeing the loss of certain revenues coming in, and the county has its own challenges because of COVID, so it’s not able to step in.”

At stake is the future of the county’s healthcare safety net, which provides far more free care to low-income patients than any other hospital in the area. Further cuts could mean dropping planned capital projects, consolidating service lines or closing some community health centers. In addition to the impact on patient care, any erosion of services would drive Cook County Health patients to private hospitals that—to varying degrees—also are dealing with the financial fallout from the coronavirus.

As one of the largest public health networks in the nation—with a $2.8 billion annual budget—the system covers Stroger Hospital on the Near West Side, Provident Hospital on the South Side, a network of clinics, an insurance company and medical services for detainees at the Cook County Department of Corrections, as well as the county’s Department of Public Health.

“The ability of a public health system to adjust to a reduced revenue stream quickly is very difficult,” says Duane Fitch, a Plante Moran partner who specializes in health care. “Health care systems have a lot of fixed costs.”

Coronavirus precautions forced Cook County Health to reduce a range of nonemergency services in March, and revenue-generating activities continue to be 40 percent lower than normal, officials said last month. At the same time, the system expects to spend up to $32 million on employee overtime, personal protective equipment and other costs related to treating COVID-19 patients.

While some public systems rely more heavily on sales taxes and other local government funding, Cook County Heath primarily runs on payments for providing medical care. Since 2013, its tax allocation from the county has decreased by more than $130 million. The county is providing $83 million in fiscal 2020 for public health and correctional health operations, but doesn’t give the health system money for traditional medical services.

SHORTFALL

Thanks to a total of $122 million in federal CARES Act provider relief funding, the health system hasn’t yet needed to seek more funds from the county, Carey says. County government has its own challenges. Its general fund faces a projected shortfall of $219.7 million in fiscal 2020, with sales taxes and other revenues down, officials said last month. It plans to address the gap “through a combination of expenditure control measures, federal reimbursements and our own reserves,” Cook County Chief Financial Officer Ammar Rizki says in an email, noting that officials don’t anticipate looking to taxpayers to fill gaps in the general fund or the health fund.

But all bets are off when it comes to a gap of up to $409 million, including the projected health fund shortfall, for fiscal 2021. “Everything is on the table,” Cook County Board President Toni Preckwinkle said last month.

“Everything falls on the taxpayers eventually,” says Laurence Msall, president of the Civic Federation of Chicago, a fiscal watchdog. “What is not known is the level of assistance from the federal government. Will it be sufficient to spare traumatic increases in Illinois and Cook County taxpayers’ obligations?”

Even before COVID-19 started spreading in the U.S., the health system was under intense financial pressure from the rising cost of uncompensated care, which includes unpaid bills and free care. From fiscal 2015 to 2019, Cook County Health saw annual charity care alone increase 23 percent to $327 million.

In 2018, Stroger Hospital spent $324.6 million, or 54 percent of its revenue, on charity care. By contrast, Northwestern Memorial Hospital in Streeterville spent $23.2 million, or 1 percent of its revenue.

Based on lower patient volumes, Cook County Health predicts charity care could drop to roughly $269 million for fiscal 2020. The dip also might be the result of other hospitals stepping up to care for uninsured COVID patients, given the potential for reimbursement from the federal government during the pandemic.

CEO SEARCH

Meanwhile, in the midst of the gravest public health crisis in generations, Cook County Health is searching for a permanent CEO. Carey, who previously served as deputy CEO of operations, took the helm on an interim basis in January after John Jay Shannon’s contract was not renewed by the health system’s independent board. Carey said the search for a permanent leader is underway, but she declined to comment further.

The system also could get a boost from its Medicaid managed care plan, which expects enrollment to increase as more people lose their jobs and qualify for government-funded health insurance. CountyCare, which operates only in Cook County, has 326,000 members and accounts for 15 percent of the Medicaid managed care market in Illinois. Like other insurers, CountyCare has had to pay fewer claims amid COVID-19 as hospitals tabled nonemergency procedures and many outpatient visits. But the health plan isn’t gearing up for a windfall.

“We know that, eventually, individuals will still need to get care,” Carey said. “It’s truly just a delay. It’s not a savings in any way.”

However, with fewer new claims coming in, the pandemic gives CountyCare an opportunity to catch up on its backlog, which prompted an inquiry from the CMS earlier this year. As of June 7, the health plan had about $175 million in unpaid claims, down from about $350 million on Feb. 9. Carey said CountyCare submitted a corrective action plan to CMS in April and has taken the appropriate steps to address the agency’s concerns.

In the meantime, revenues are slowly recovering as nonemergency procedures resume. But many unknowns remain, including whether a second wave of COVID-19 could hit, forcing hospitals to buy up even more personal protective equipment and suspend nonemergency care once again. In addition to the steps Cook County Health is taking to address the potential deficit, Carey said other hospitals in the area also will play a critical role in the system’s future.

“It’s so important that we have others help in terms of charity care and the uninsured,” Carey said. “If we start cutting back services because we just do not have the resources, it will impact every other health system in this county.”

How COVID-19 threatens healthcare in Chicago county” originally appeared in Crain’s Chicago Business.



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