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The financial woes at Calais Regional Hospital and Penobscot Valley Hospital predate the current coronavirus pandemic. Both institutions had already declared bankruptcy in 2019, a year that saw a record number of closures for rural hospitals nationwide.
In many ways COVID-19 has further exposed and magnified the existing cracks in how our health care system reaches rural communities. But on top of that, the existing bankruptcy problems at these two Maine hospitals are causing new complications, with the U.S. Small Business Administration deciding that entities in bankruptcy pose too high a risk to receive relief through the Paycheck Protection Program (PPP).
That program was passed as part of the $2.2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES Act) which did not expressly prohibit the SBA from lending to bankrupt businesses. And while there’s an undeniable logic in being wary of loaning to bankrupt businesses, especially when this program already ran out of money once and needed to be replenished, there’s a good case for creating an exception for rural hospitals.
First off, these hospitals can mean life or death in rural communities. A 2019 study from researchers at the University of Washington found that rural hospital closings in California from 1995 to 2011 caused the surrounding communities to see a nearly 6 percent increase in mortality rates.
These providers also have canceled non-essential procedures during the coronavirus pandemic in line with federal and state guidance, losing critical revenue, all while preparing to tackle the unprecedented situation created by this pandemic. For example, Penobscot Valley Hospital has seen patients visits reduced by 50 percent in the last month, according to CEO Crystal Landry.
While several other Maine hospitals, among thousands of Maine businesses including the Bangor Daily News, have been able to access PPP forgivable loans, the Calais and Penobscot Valley hospitals are currently ineligible — a determination they are fighting separately in court.
Coronavirus relief isn’t going to erase the many challenges that these and other rural health care providers faced before this pandemic. And the PPP loans aren’t the only avenue for that relief (Collins and King announced Friday that 121 Maine rural health care providers are receiving a total of more than $131 million through the CARES Act). But, according to the hospitals, being able to access PPP loans could make a difference in their ability to stay open in the coming months. A 10 percent staff reduction has already been announced in Calais.
The three members of Maine’s congressional delegation that represent the areas where these two hospitals are located have joined together on a letter asking the SBA to make an exception for nonprofit critical access hospitals.
“We strongly urge the agency to amend this interim final rule to enable these vital health care institutions to receive PPP loans to help them remain operational when they are needed the most,” Sen. Susan Collins, Sen. Angus King and Rep. Jared Golden wrote in a letter to SBA Administrator Jovita Carranza. “While these entities are few in number, they are vitally important to the communities they serve, both as frontline health care providers during this public health emergency and as anchor institutions that provide the paychecks and local economic stability that Congress intended this program to preserve.”
“These institutions need temporary financial assistance to weather sharp revenue decreases that have resulted from federal and state instructions to cancel elective medical procedures as part of COVID-19 response preparedness,” the legislators added.
COVID-19 didn’t cause the bankruptcies at these two Maine hospitals. But it undoubtedly makes it harder for them to weather those bankruptcies and the long list of challenges that were already facing America’s rural hospitals such as low patient volumes and isolation.
PPP funds would seem to be more of a bandaid than a financial cure in these two Maine cases. But the most recent wound is one caused in part by the hospitals doing what the federal government is telling them to. The SBA should listen to Maine legislators and make this specific exception.
More than 100 rural hospitals have closed since 2010. Without larger systematic adjustments at the state and federal level, perhaps that list was bound to get longer with or without the impacts of coronavirus. There could not be a worse time, however, to let programmatic rulemaking get in the way of much-needed aid for these institutions.
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