Hospital CEO Sees Industry Shift as 50% of Revenue Disappears

(Bloomberg) -- Trinity Health Chief Executive Officer Mike Slubowski says health-care providers like his are far from being out of the woods financially.

The leader of the non-profit Catholic health system, which is one of the largest in the U.S. with more than 90 hospitals in 22 states, said that’s because of what’s known about the coronavirus so far: it’s highly contagious, there’s no effective treatment yet, and there likely won’t be a vaccine for at least a year.

Those conditions will make it tougher for hospital networks like his to start conducting the non-essential procedures that are crucial to their business. He estimates that the aid Trinity has received so far from a federal stimulus measure will make up for what it lost in March, but beyond that the outlook is uncertain. Congress’ latest package includes $75 billion to reimburse hospitals for their expenses or revenue they may have lost.

“When 50% of your revenue goes away, it’s pretty hard to adjust to that,” Slubowski said in an interview.

Consulting firm Kaufman Hall estimates that hospitals’ operating margins fell by 150% year-over-year in March due to cancellation of procedures like joint replacements. Slubowski said part of the challenge for hospitals will come from allowing those procedures to begin again while making sure that patients are safe and comfortable coming in for care.

The lack of testing materials in the U.S. is a challenge, as well, because Slubowski said Trinity would like to test patients before they come in for major procedures or surgeries. And the shortage of gowns will also pose a challenge, he said.

Slubowski said the health-care industry is in the midst of a major shift: he expects Trinity will likely become a “smaller” organization as a result of the pandemic and potentially consolidate some of its sites. In a shift that could affect a variety of industries, Slubowski said the success of working-from-home arrangements may cause the organization to shed some office space to cut costs.

Already, 15,000 of Trinity’s 125,000 employees have been furloughed and senior leaders took pay cuts ranging from 15% to 25%. And Slubowski, who cut his pay 50%, said he considers Trinity one of the fairly healthy health-care systems.

“Some organizations are essentially bankrupt as a result of this situation,” he said.

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