'HARDENING' TIMES: MOUNTING LOSSES SPURRED BY PANDEMIC FORCES DIFFICULT CHOICES AT VIDANT HEALTH AND OTHER N.C. HOSPITALS.

• Author: Martin, Edward

Blocking many of your best customers from showing up isn't the smartest business strategy, but U.S. hospitals had to take that approach in recent months to clear space for an unexpected surge in coronavirus patients. Not surprisingly, the decision to postpone elective procedures quickly hammered hospital finances, with North Carolina's 130 health care operators losing as much as $3 billion in combined revenue, says Steve Lawler, president of the N.C. Healthcare Association.

Some of the biggest hits occurred at Winston-Salem-based Wake Forest Baptist Health, Fayetteville-based Cape Fear Valley Health and Greenville-based Vidant Health, which furloughed workers and cut executive compensation by as much as 30%. Necessary but not-urgent procedures such as colonoscopies and orthopedic operations typically make up the bulk of profits for hospitals, but they were postponed because of COVID-19, notes Bradley Staats, director of the Center for the Business of Health at UNC Chapel Hill's Kenan-Flagler Business School. Emergency department volume at N.C. hospitals declined by as much as 50% as state leaders urged citizens to avoid public settings.

"North Carolina hospitals have responded to this pandemic to make sure [the] people of the state have the best care possible to deal with it," Lawler says. "But they've had to turn on a dime, change their business models, and devote their time and attention to hardening their facilities, preparing their staffs, and increasing their supply levels to ensure North Carolina didn't turn into another New York or Washington state."

The pandemic's timing was a particular hardship for Vidant, which CEO Michael Waldrum capsulized in a virtual town hall meeting in April. "We started in a distressed, underserved region, primarily rural with a high burden of disease, so we're having to mount our response on that foundation," he said.

In the previous month, Waldrum announced the layoffs of 191 employees, mostly at the corporate office and flagship Vidant Medical Center in Greenville. The move followed an $18 million budget shortfall in the first quarter of Vidant's fiscal year. "While beds are full and patient volumes are up, net revenue has declined, and costs associated with serving our mission have increased," Waldrum wrote in an email to staff.

Vidant declined to release details about its finances, and Waldrum and board chairman Bryant Kittrell would not comment. The not-for-profit authority reported operating income...