Dear Mr. Powell, Ms. McWilliams and Mr. Otting:
On behalf of our nearly 5,000 member hospitals, health systems and other health-care organizations, our clinician partners – including more than 270,000 affiliated physicians, 2 million nurses and other caregivers – and the 43,000 health-care leaders who belong to our professional membership groups, the American Hospital Association (AHA) urges each of the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, in their respective capacities as the primary federal regulator for insured depository institutions, to take prompt action to assist health care providers on the front line of the COVID-19 pandemic should the need to do so arise.
Many hospitals and health systems and other health care providers face unprecedented financial impact as a result of COVID-19. The pandemic’s effects on health care organizations have been devastating. The pandemic has led to drastic decreases in revenues, accompanied by significant increases in expenses and large losses in the investment portfolios so essential to support the income of these providers as they fearlessly care for patients and communities. The financial impact of these events may significantly reduce hospitals’ liquidity and limit their access to capital markets and bank debt. Yet the substantial and necessary support already provided by the Coronavirus Aid, Relief and Economic Security (CARES) Act and the Federal Reserve still falls short of what our nation’s hospitals and health systems will eventually need.
As a result of the COVID-19 crisis, the AHA estimates a four-month financial impact of $202.6 billion in total losses for America’s hospitals and health systems, or an average of $50.7 billion per month. This impact is detailed in the attached report. Hospitals in many states are just now beginning to re-open for non-urgent medical and surgical procedures and other patient care appointments. Up until then those procedures and appointments were deferred, at the request or command of federal and state authorities. And, many individuals avoided medical treatment unrelated to COVID-19. All of this disruption resulted in significantly reduced patient volumes and operating revenues. Our hospitals and health systems also are incurring additional costs for staffing during an outbreak, including for overtime wages, premium pay, and wages paid to employees who are unable to work due to quarantine. The COVID-19 pandemic also disrupted the production and availability in some locations of medical supplies and equipment, such as personal protective equipment, necessary to safely treat affected patients, and has materially increased the cost to obtain these items when available.
Further, the COVID-19 pandemic has resulted in substantial volatility in the global financial markets, and the value of hospitals’ and health systems’ investment portfolios has fluctuated along with this general market volatility, resulting in significant realized and unrealized losses in those investment portfolios. Just at the time the support of these investments is most needed, health care providers may no longer be able to rely on their portfolios to sustain operations.
The AHA acknowledges the April 7, 2020, Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised). A similar Interagency Statement targeted to financial institutions working with health care providers would be a useful first step in assuring that hospitals and health systems can maintain essential operations. It is in the best interests of the nation and the health of our citizens to signal the importance of the continued viability of our front-line providers and health care organizations. Such an Interagency Statement could recommend easing the burden of various financial covenants, forbearance on timing of payments of principal and interest, and extending or expanding borrowing facilities notwithstanding the financial stresses these borrowers are facing should that become necessary.
We appreciate your leadership and look forward to continuing to work with you during this critical time to protect the health of our nation.
Richard J. Pollack
President and Chief Executive Officer