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Faced with millions in coronavirus costs, Anne Arundel Medical Center turns to furloughs, layoffs and benefit cuts

Luminis Health, parent company of Anne Arundel Medical Center in Annapolis and Doctors Community Hospital in Prince George’s County, estimates it will end the 2020 fiscal year with a $13 million operating loss because of the coronavirus pandemic.

Despite treating the virus’s most critical victims, hospital systems have not escaped mounting financial losses caused by a standstill economy and sedentary social routines. As the state takes hesitant steps toward a new normal and elective procedures start up again, Luminis is cutting costs to close a projected $31 million budget gap in the fiscal year that starts July 1.

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“While Luminis Health is a very high performing, successful and financially strong system, the economic impact of COVID-19 has not passed us by,” Luminis Health CEO Tori Bayless told The Capital.

In the next 60 days, Luminis will implement wide-ranging cost-cutting measures aimed at closing the 2021 budget gap. The company plans to layoff and furlough some additional workers, suspend employer contributions to retirement funds, review consultant contracts, hold vacant positions and reduce both bonuses and merit-based salary increases to close the estimated shortfall.

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Bayless said the expected number of layoffs and furloughs across the health system is under review.

The measures are predicted to close the $31 million gap and generate $16 million in operating profit by the end of the 2021 fiscal year. The not-for-profit health system also is preparing for a $13 million budget loss by the end of the 2020 fiscal year.

AAMC furloughed 1,100 workers last month and has since brought back 350 employees to treat COVID-19 patients and work in other areas of the hospital. Doctors whose normal practices slowed to a halt during the coronavirus pandemic were offered a 30 percent pay cut loan to prop up lost income. Luminis plans on bringing back more furloughed workers as outpatient practices and elective surgeries slowly regain momentum.

Bayless and 25 other senior staff at Luminis took a pay cut ranging between 20% to 30% of their annual income. Many of those dollars will be funneled into an employee hardship fund. The fund, created before the pandemic, goes toward employees experiencing sudden traumatic life events that affect their financials, including furloughs, reduced income and other unexpected changes brought by the pandemic.

Bayless, who made over $1.2 million during the 2017 fiscal year according to AAMC’s 990 IRS form, took a 30%, or $360,000, pay cut.

Gov. Larry Hogan gave Maryland hospitals and other clinics permission to reopen and resume money-making elective surgeries and other ambulatory procedures on May 6, but it could be months before patient volumes reach levels seen before the pandemic swept the state two months ago.

Luminis increased spending on its two hospitals during the rush to prepare for a looming surge in COVID-19 patients that was originally estimated to exceed AAMC’s capacity by 150%. Emergency departments, labor and delivery and oncology units continued while expenses for temporary specialized staff and COVID-19 protective equipment increased significantly, Bayless said.

AAMC, which converted a hospital floor into a COVID-19 ward and deployed triage tents outside, added 300 beds to its 380-bed facility. Doctors Community Hospital, a 200-bed hospital, also expanded physical space to include 300 additional beds.

During that time, the rate of non-emergent care plunged as patients delayed scheduled procedures and refrained from visiting hospitals for needed services, a trend that health care associations hope to squash.

“Some people they might have delayed a really important procedure or something that was urgent but not necessary for two or three months now, and the problem is that if you ignore a medical problem for some period of time, you can make that problem much more damaging,” said Gene Ransom, CEO of MedChi, the Maryland State Medical Society. “Obviously, there's an economic component to all of this but it's not nearly as important as the public health component.”

Hospitals must approach the transition back to providing elective care, such as knee replacement surgery and wellness checks for vaccine updates, during the pandemic with heightened caution and a careful pace.

“They can't run at full capacity like they could before because of the things they need to do to protect patients. And then the second issue is that the patients are nervous about coming back,” Ransom said.

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A clinical team is in the process of looking at the backlog in patients waiting for a variety of surgeries and other procedures and determining how to bring back surgeons from a range of departments, Bayless said.

Facilities must have at least a one-week supply of personal protective equipment to resume elective procedures, a requirement of Hogan’s decision to lift the ban. But there is a shortage of protective gear across the country and in Maryland, where hospital gowns are particularly hard to find.

The estimated $13 million revenue loss through June at Luminis is consistent with predicted drops in revenue felt by hospitals across the state, according to Ransom. About four dozen acute care hospitals expect to lose about $1 billion in revenue from April through June, or about a quarter of their normal revenue, according to the Maryland Hospital Association.

The hospitals received state funding and federal aid through the CARES Act, but not enough to support costs created by COVID-19 or offset the loss in revenue from seven weeks of halted elective and ambulatory procedures. The undisclosed fund amount is supporting a range of COVID-19 and regular patient care during the public health crisis.

Luminis plans to adjust staff size as patients slowly resume their previous care plans and seek new appointments, a majority of which will be done over telehealth or video appointments that bill at a fraction of the cost. Luminis Health plans to extend a hiring freeze through 2021 with limited exceptions.

The merger of AAMC and Doctors Community Hospital last year has positioned Luminis to better respond to the public health crisis by sharing drugs and easily transferring patients, Bayless said. Before the pandemic hit, Luminis Health oversaw 635 beds, more than 6,400 employees, 1,800 medical staff and 1,300 volunteers.

“We’re not seeing this as an insurmountable economic impact. I see it as relatively short term. So, I’m actually pretty optimistic about where our system is headed,” Bayless said.

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