Officials from UI Hospitals and Clinics discuss financial impact of COVID-19 for fiscal 2020, 2021 with regents

Even with the resumption of elective surgeries and an institutional rate of survival to COVID-19 of 99.7 percent, UIHC faces a projected loss of $100 million in fiscal 2020 and an uncertain, potentially larger number in fiscal 2021.


Katie Goodale

University of Iowa Hospitals and Clinics is seen on Sept. 17, 2018.

Katie Ann McCarver, News Editor

University of Iowa Hospitals and Clinics officials discussed a projected $100 million in costs due to COVID-19 in a virtual state Board of Regents meeting Thursday. As the UI healthcare system transitions out of crisis response and into the “new normal,” it anticipates an even larger financial impact in fiscal 2021.

According to regent documents, UIHC saw historically low patient volumes in April and May. Hospital occupancy declined by 26 percent, and clinic volumes declined by 44 percent. As previously reported by The Daily Iowan, UIHC postponed 100 percent of its elective procedures in its initial response to the novel coronavirus outbreak.

UIHC CEO Suresh Gunasekaran said Thursday that patient volume has increased since the resumption of elective surgeries by the end of May, but is still lagging behind what it has been in the past.

“The decision to temporarily suspend elective procedures, while absolutely the right thing to do to conserve PPE and get us better prepared, had a severe negative impact on our revenues,” said UI Vice President for Medical Affairs Brooks Jackson on Thursday. “In a matter of weeks, we went from being on track for one of our best years ever, financially speaking — to one of our worst.”

The world is not the same as it was before the coronavirus, Gunasekaran said. There will likely be a slower return of patients wanting to be seen in-clinic, and their economic circumstances, employment, or insurance may have changed — affecting demand for elective surgeries or transfer volume, he said.

In response to a question from Regent David Barker about whether UIHC would consider postponing elective surgeries again — should there be a second wave of coronavirus cases — Gunasekaran said it will depend on how many cases of COVID-19 there are, and even so there will not likely be a total elimination of all elective surgeries.

In the last four months of fiscal 2020, UIHC expects a financial impact of $100 million because of the virus. According to regent documents, federal stimulus funding will be between $30 to $40 million, and the health care system could lose $20 to $30 million per month in fiscal 2021 if hospitals and clinic volumes don’t return to their normal capacity or expenses aren’t controlled.

RELATED: UIHC expected to take unprecedented $100 million hit this fiscal year due to COVID-19 with more losses on the horizon

“Federal economic assistance has helped ameliorate some of the losses, and we are grateful for the support of our federal delegation for the recognition of the unique and vital role hospitals like ours play during the epidemic,” Jackson said. “But the magnitude of the losses far outpace the limited relief.”

There are, however, reasons to be optimistic, Jackson added. He noted that fourth-year medical students have returned to the hospital to begin clinical rotations and the research enterprise at UIHC and the Carver College of Medicine have resumed work — including in research regarding the coronavirus.

UIHC officials believe the UI health care system is one of the safest places in the state, Jackson said, and are confident in its ability to safely and effectively treat COVID-19-positive patients. No employee of UI Healthcare has been impacted as a result of caring for coronavirus patients, and the survival rate of those patients is 99.7 percent — among the best in the world, Jackson said.

The UI is also prepared to treat Iowans for a range of other, non-COVID-19, critical health care conditions, he said.

“We want everyone to know how important it is for them to seek the care they may need,” he said. “And we want them to know it is safe to come back to the University of Iowa Hospitals and Clinics. So we stand ready.”

Gunasekaran compared UIHC’s response to COVID-19 to climbing mountains of varying sizes. The first mountain required the UI to modify its health care system to receive coronavirus-positive patients, which it did by implementing visitor restrictions, moving to a work-from-home format for some staff, and increasing safety and cleaning standards. 

“The next mountain will require us to modify the organization to deal with a new financial reality — and we’re not sure what this financial reality is,” Gunasekaran said. “… What we do know is that it is the largest financial challenge that this organization has ever faced. And the kinds of losses we’ve already seen from this are simply staggering and unprecedented.”

RELATED: UI Health Care leaders say COVID-19 takes financial toll on system; focused on resources for patients, staff

As previously reported by the DI, COVID-19 is expected to impact UIHC’s budgeted 3 percent margin necessary for capital improvements. According to regent documents, UIHC needs $80 million to afford essential capital, such as space renovations, equipment replacement, and additional maintenance.

The months of April, May, and June are typically the highest margin months, said UIHC CFO Bradley Hawes on Thursday.

“So when we go into next year, we’re looking at a challenge of not only facing potential losses in a month, or annualized, but the fact that we may not be able to get to the required capital that we have any year,” Gunasekaran said.

UIHC will seek a breakeven budget for fiscal 2021, Gunesakaran said, which will require it to have significant improvement across its system. This means improving inpatient, outpatient throughput, increasing the profitability of services with more efficient scheduling, growing programs in areas of cancer, orthopedics, or cardiovascular care, and women’s and children’s services.

Jackson expressed appreciation for the support and collaboration that UIHC has garnered from university leadership, the regents, and community members in Iowa as it continues to respond to COVID-19.

“On behalf of the board and all Iowans, I again want to thank everyone at UIHC for being the heroes on the frontlines of the COVID-19 pandemic,” Regent Sherry Bates said. “… We want you to know that this board stands with you and supports you during this challenging journey ahead.”