VCU Health experiences financial deficit

Diana Ho, Contributing Writer

VCU Health is currently facing a margin loss of approximately 2% when factoring in interest and depreciation, according to Laura Rossacher, the director of public affairs for VCU Health.

The medical center still remains cash flow-positive and is profitable at an operating level, Rossacher stated in an email.

Medical centers like University of Pittsburgh Medical Center and Mass General Brigham in Boston are experiencing stress on finances similar to VCU Health. UPMC lost 4% of its margin and Mass General Brigham lost approximately $200 million in recent months, according to Rossacher.

“Our preliminary unaudited operating revenue in FY22 [Fiscal year 2022] was $2.8 billion, a remarkable year-over-year increase of 9.5%,” Rossacher stated. “Unfortunately, our operating costs grew too.”

These numbers are not final, Rossacher stated. VCU Health is currently undergoing the annual financial audit for FY22 and will expect official, audited results to become available in the coming weeks.

Health systems are facing unprecedented financial conditions nationwide. Stacey Hughes, executive vice president for government relations and public policy for the American Hospital Association, provides an explanation for VCU Health and other health systems’ financial situations, Rossacher stated.

Hughes stated in her Fierce Health op-ed one-third of hospitals are operating in the red, while another one-third are barely breaking even prior to the pandemic. The shockwaves from COVID-19 have overwhelmed hospital staff, which has added additional stress since the labor shortage since 2019.

The demand for nurses is projected to grow to 260,000 by 2025, according to the American Association of Colleges of Nursing. This demand would be twice as large as any demand experienced in the U.S. since the mid-1960s.

“Our goal is to return to a 1% operating margin this fiscal year. To meet that goal, we have a range of operational initiatives underway to reduce costs and boost revenue without compromising the outstanding care we provide,” Rossacher said.

VCU Health did not provide an additional statement to specify the initiatives that will reduce costs for hospitals.

“I wish they could give us more tangible points on what these changes are going to mean for us, like when you say 1% margin, I have no idea what that means. It’d be nice to know, like put it in our terms,” said VCU Health nurse Brit Gillespie.

Gillespie has worked in the neonatal intensive care unit since the start of the pandemic. VCU has not provided much transparency about hospitals experiencing deficits, she said.

“I’m also just so busy with my job as a nurse that I don’t look into that side of things, but we definitely feel the effects. And a lot of it is with staff retention and pay, with supplies too — especially the past year — like even worse since COVID,” Gillespie said.

Hospitals nationwide have been experiencing supply shortages due to the pandemic, according to the Food and Drug Administration website. Gillespie said she is scared if any of her patients could die due to the absence of staffing, supply or medication shortages.

“I’m really scared for the future of patients. Like, who is going to safely take care of them? Because so many [nurses] have left and we barely have that many nurses that are familiar with the unit, and how things work, or have that much experience,” Gillespie said.

Gillespie said that keeping patients alive is a big responsibility. However, when nurses are not given the proper time or resources to make the difference in their patients’ lives, the profession can become tiresome, causing retention issues. 

A lot of health systems including VCU Health are experiencing deficits or economic loss as a direct result of the COVID-19 pandemic, according to economics professor Christopher Herrington. 

“VCU Health is a vital part of the Richmond economy and community for many reasons. It employs thousands of people, serves hundreds of thousands of patients, and trains the next generation of healthcare professionals across numerous specialties,” Herrington said. “So it is absolutely in everyone’s best interest that VCU Health remains fiscally sound and continues growing to serve the healthcare needs of this community.” 

The pandemic was extremely taxing physically, mentally and emotionally; in the wake of the pandemic, employment in health care dropped drastically, and it has still not recovered to pre-pandemic levels, according to Herrington. 

“As a result, hospitals and medical offices that were unable to meet staffing needs often turned to temporary, and much more expensive, solutions like travel nurses,” Herrington said. “Undoubtedly, this channel also contributed to the financial challenges that we’re now seeing with health systems like VCU Health.” 

However, Herrington said this deficit is not cause for panic, as long as VCU Health does not continue to experience economic loss over the next couple of years.

“From my outside perspective, it seems that VCU Health is making significant investments, which are costly today but provide the foundation for serving more patients and generating greater revenue in the future,” Herrington said.