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RI Hospital owner Lifespan lost $76 million in March; no salary for CEO

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PROVIDENCE, R.I. (WPRI) — The coronavirus crisis has now become a financial crisis for local hospitals, with expenses surging at the same time revenue is getting crushed as patients are forced to put off elective surgeries and other care.

Lifespan, Rhode Island’s largest hospital group, disclosed Wednesday morning that it suffered an operating loss of $33 million just in the month of March — roughly $10 million more than the not-for-profit corporation’s operations had lost during the entire 12 months of the previous fiscal year. Lifespan owns Rhode Island, Miriam, Bradley and Newport hospitals.

In addition to the cancellation of elective surgeries, major contributors to the loss included the closing of ambulatory sites and a drop in emergency room and doctor’s office visits. Hospital leaders also reported higher costs from keeping idle staff on the payroll, buying extra personal protective equipment, and spending on labs and tests, as well as restructuring costs unrelated to coronavirus.

Investment losses in Lifespan’s endowment due to last month’s market plunge brought the organization’s total net loss for March to $76 million — a stunning amount for a single month, and more than double Lifespan’s total net loss for last fiscal year. (Some of those investment losses have presumably eased in April in light of this month’s Wall Street rally.)

Lifespan President and CEO Dr. Timothy Babineau, who earned about $2.8 million in 2018, said he stopped accepting a salary on April 1 as the financial problems worsened.

“From a purely financial standpoint, this crisis could not have come at a worse time for Lifespan,” Babineau said in a statement.

In a follow-up interview, he told WPRI 12, “They were devastating numbers when we saw them. … Other businesses lose their revenue and are able to lower their expenses. We lost our revenue and had to increase our expenses to provide care. That’s what’s unique.”

In recent months Lifespan had been working to implement a turnaround plan following a $23 million operating loss in its 2018-19 fiscal year, which ended last Sept. 30. It had reduced the red ink considerably before COVID-19 hit the United States, and its biggest hospitals — Rhode Island and Miriam — had been nearly full before the crisis.

“Unfortunately, we anticipate that April and May will be even worse, and we could approach $100 million in operating losses for the time period March to May,” Babineau said. “We are working around the clock developing plans to mitigate these losses while working hard to keep as many Lifespan staff employed as possible.”

Lifespan’s deficit could be close to $300 million by the end of 2020 depending on how quickly thing stabilize, he added.

Lifespan is Rhode Island’s largest private employer with more than 15,000 people on its payroll at last check. The hospital group already eliminated 87 corporate jobs last month, and 218 employees took an early retirement offer effective March 28. (Eight of their jobs were among those eliminated.)

Frank Sims, president of the United Nurses and Allied Professionals Local 5098, said his union has expressed concern directly to the governor and congressional delegation about the financial situation. UNAP represents about 2,700 nurses, technologists, therapists and mental health workers at Rhode Island Hospital.

“UNAP has worked closely and well with hospital leaders during these difficult times, and we recognize the extreme financial pressure Lifespan is under, but our members are risking their lives and any present or future plans to reduce staff at Rhode Island Hospital would be borderline criminal,” Sims said in a statement.

Babineau went out of his way to downplay the possibility of further job cuts across Lifespan.

“We have not laid anyone off and as I sit here today, we don’t have any intention of laying anyone off,” he said. “It is our hope and desire and belief that we’re going to need that workforce back in earnest, hopefully shortly.”

Nor is Lifespan alone.

Care New England, Rhode Island’s No. 2 hospital group, recorded a net loss of $44.5 million in March, with a $15.2 million operating loss and a $29.3 million non-operating loss largely tied to investments, according to Joseph Iannoni, the organization’s chief financial office. Care New England owns Women & Infants, Kent and Butler hospitals.

Although other local hospitals have not revealed financial information yet, it’s widely acknowledged that coronavirus is creating a cash crunch for facilities coast to coast.

Congress has begun steering emergency funding to hospitals, including an additional $75 billion included in the nearly $500 billion interim relief bill that lawmakers and the Trump administration just agreed on.

“Hospitals and health systems are in a unique position because of the loss of revenue from non-emergency medical procedures while incurring increased costs due to preparing and responding to this public health emergency as it continues to spread throughout the country,” American Hospital Association President and CEO Rick Pollack said Tuesday.

Lifespan has already received $25.1 million in additional federal aid from the $2.2 trillion CARES Act that Congress passed earlier this month, as well as a short-term loan. Care New England said it received $8.7 million from the first round of CARES Act grants.

“Certainly, a help, but much more needs to be done,” said Babineau. Both congressional and state lawmakers need to “provide enough financial relief to ensure that Lifespan can be here when our citizens need us the most,” he added.

The next cut of federal aid to hospitals is expected to be steered toward the hospitals that had the most COVID-19 patients as of April 10, before the surge picked up in Rhode Island, so it is likely to help hospitals in places like New York more than locally, according to Mamie Wakefield, Lifespan’s chief financial officer.

About 80% of Rhode Island’s COVID-19 patients are in a Lifespan hospital, according to officials there.

Gov. Gina Raimondo — who has praised Lifespan as well as the state’s No. 2 hospital group, Care New England, for their work battling the pandemic — is among those concerned about the situation.

“Hospitals are struggling right now,” she told reporters on a conference call Sunday, noting that the cancellation of non-critical surgeries due to coronavirus has created “a real revenue problem for hospitals” in many states.

“As I think about things that I need to work on, hospitals need financial relief and I need to figure out a way to help them get back into the business of reopening some of their non-critical surgeries, because frankly, they need that financial stability,” Raimondo said.

Ted Nesi (tnesi@wpri.com) is WPRI 12’s politics and business editor and a Target 12 investigative reporter. He is a weekly panelist on Newsmakers and hosts Executive Suite. Follow him on Twitter and Facebook

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