Midwest Health System Leverages Banking Relationship to Prepare for COVID-19
Author: FNBO Customer Stories
Even though the COVID-19 pandemic has made hospitals busier than ever before, that doesn’t mean they aren’t feeling the financial effects of the pandemic. When hospitals canceled elective procedures and non-essential appointments in early 2020, they immediately started experiencing financial impacts. This is due to the large amount of revenue hospitals receive from non-emergency procedures.
For example, studies have found that surgical stays account for around 48% of hospitalization costs . The American Hospital Association reported that on average, hospitals were losing more than $50 billion per month  in May of 2020.
On top of these challenges, hospitals were looking for new ways to prepare their facilities and employees for incoming COVID-19 cases.
One of the largest healthcare systems in the Midwest was not immune to the challenges the coronavirus created. When the health system was faced with canceling and postponing non-essential procedures, which normally create high margins, it felt the financial impacts. Additionally, the health system felt it necessary to prepare for a potential surge in COVID-19 hospitalizations and any associated expenses, like personal protective equipment (PPE).
The cost of PPE has risen across the country. According to a report published by the Society for Healthcare Organization Procurement Professionals, the price for PPE supplies has increased more than 1,000 percent in some instances . The report found that the cost of N95 masks went up from $0.38 to $5.75 each, the cost of vinyl exam gloves went from $0.02 to $0.06 and the cost of isolation gowns went from $0.25 to $5.00.
Due to these issues, the health system was preemptively preparing for a decline in cash flow and an increase in COVID-related expenses.
With a focus on fortifying liquidity at a critical time, the health system began working to identify a bank to support their capital plans. FNBO partnered with the health system to provide a $275 million syndicated revolving credit facility. FNBO’s ability to quickly structure the deal and secure bank commitments for the $275 million provided the health system with the capital they desired in a timely manner. A transaction that would normally take months was completed in a few short weeks—ensuring that the health system was better able to prepare for the incoming COVID-19 challenges.
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The healthcare industry is quickly adapting to new challenges and demands. Our Healthcare Banking team will help you evaluate potential growth transactions, working capital needs and financing opportunities. We provide credit facilities that align with short- and long-term objectives. Our flexible credit structures include:
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 Health Leaders Media. https://www.healthleadersmedia.com/clinical-care/ahrq-surgical-admissions-bring-48-hospital-revenue
 International Travel & Health Insurance Journal. https://www.itij.com/latest/news/us-hospitals-losing-around-50-billion-month-due-covid-19
 Society for Healthcare Organization Procurement Professionals. http://cdn.cnn.com/cnn/2020/images/04/16/shopp.covid.ppd.costs.analysis_.pdf
The articles in this blog are for informational purposes only and not intended to provide specific advice or recommendations. When making decisions about your financial situation, consult a financial professional for advice. Articles are not regularly updated, and information may become outdated.