County sets aside $55M from budget for hospitals due to COVID-19

Facing a budget shortfall in its hospital system, the Santa Clara County Board of Supervisors unanimously approved $55.25 million in emergency funding on Tuesday for Santa Clara Valley Medical Center hospitals and clinics to respond to the COVID-19 pandemic.

An additional $15 million was moved out of the Bascom campus’ funding to O’Connor Hospital, which had a high staffing vacancy rate in fiscal year 2019-20 and needed to contract nurses and other clinical staff to backfill and meet daily and COVID-19-related needs. The Bascom facility benefited from additional Medi-Cal revenue, which allows for the subsidy, according to a staff report by John Cookingham, chief financial officer of the Santa Clara Valley Health and Hospital System.

The request for the appropriations change came after substantial losses in revenue and a rise in costs directly related to the coronavirus emergency. The crisis has required significant costs for patient services and to prepare the county hospital system, which includes the Bascom and O’Connor campuses in San Jose and St. Louise campus in Gilroy, for a potential surge in COVID-19 cases, he said in the staff report.

The medical center purchased beds, ventilators and other equipment to meet the potential emergency demand. Among other expenses, the hospitals also paid $15 million for outside registered nurses; $5.3 million for temporary workers and overtime for additional staffing; $4 million for medical supplies, including personal protective equipment; and $6 million for pharmaceuticals, according to the staff report.

Like other area hospitals, the medical center lost revenue when it suspended nonessential services, including most surgeries and nonurgent procedures, in anticipation of a surge in seriously ill coronavirus patients and reassigned outpatient staff to support people with COVID-19. Overall patient volume sharply declined starting in mid-March. As a result, the medical center projects a loss of approximately $1 million per day. A line-item budget shows a loss of $60.69 million from in-patient hospital revenue.

The request for an appropriation modification for the current fiscal year replaces the estimated $60.7 million lost in patient revenue through April 30 with new federal disaster relief revenue, which the medical center expects it will receive under the federal CARES Act Provider Relief Fund.

The budget appropriation modification would not cover losses for May and June, however. Those costs would be addressed at a later time when details regarding the federal disaster relief programs become more clear. Cookingham anticipates these programs will provide additional funding, he wrote. The medical center also expects it will receive an additional $40.25 million in Federal Emergency Management Agency (FEMA) money.

There was little discussion regarding the hospitals’ appropriation directly, but the supervisors took a stronger stance regarding fiscal accountability before they unanimously approved a separate $175 million budget appropriation modification to increase revenue and expenditures in the county’s Controller-Treasurer Department for COVID-19 costs.

Supervisor Susan Ellenberg noted that during a presentation on public health milestones, staff said they needed to build “guardrails” to safely reopen the county through testing, personal protective equipment and contact tracing, and to enhance communications to the public to clarify the county’s stay-at-home order and guidance.

“I see our ability to meet these targets largely as a function of our investment in those systems. As much as we are talking about deficits and where we may be spending too much, I don’t think we are spending unnecessarily. But I worry we are asking a relatively small team in the EOC (Emergency Operations Center) and the Public Health Department to bear an enormous burden and I don’t know if provided resources align up to these demands,” she said.

Ellenberg said she asked at the board’s April 21 and May 5 meetings for a report on emergency appropriations to date, but thus far staff has not provided the details. She noted that a previous budget showed $17 million to be spent out of the EOC, but at present, the appropriations show $74 million in expenditures. None of those items are detailed.

Ellenberg said she is interested in “seeing the details of where we are spending, including in alignment with the indicators that we need to achieve on PPE, testing and tracing. (It) is really critical to our oversight and the public trust in our response,” she said.

County Executive Jeff Smith said staff would prepare those details by June 23, when the board is scheduled to hold a budget workshop, but Ellenberg pressed for a sooner, off-agenda account related to the budgets for testing, tracing and other requirements that must be in place before the county can take the next steps to reopen.

Budget Director Greg Iturria said the county has received $158.1 million from the CARES Act last month. The county estimates it will also collect an additional $15 million in FEMA public assistance programs and $2 million from the California Office of Emergency Services. The county has also received a 6.2% increase in its share of reimbursement from Medi-Cal, he said.

Iturria said he expected some of the $175 million funding won’t be used in the current fiscal year and staff would ask for the remainder to be reappropriated in the new fiscal year during the board’s June 23 meeting.

As of May 12, the Santa Clara Valley Medical system has received $15.7 million from the federal Health and Human Services Provider Relief Fund, according to a U.S. Centers for Disease Control and Prevention database. In comparison, Stanford Health Care received $102.4 million. Representatives of the Service Employees International Union-United Healthcare Workers West said that’s the largest sum granted to any medical facility in the state and the third largest in the country.

Stanford announced on April 21 that it would require employees to take 96 furlough hours over a 10-week period or a 20% pay cut for 10 weeks starting on April 27. Stanford Health Care CEO David Entwistle said during an interview earlier this month that the hospital had a 50% decline in inpatient occupancy starting March 13 to comply with Gov. Gavin Newsom’s order for hospitals to temporarily suspend elective surgeries and procedures to make room for a projected surge in COVID-19 patients. Stanford resumed elective surgeries on May 4.

Find comprehensive coverage on the Midpeninsula’s response to the new coronavirus by Palo Alto Online, the Mountain View Voice and the Almanac here.