Topics
More on Risk Management

When disaster strikes: CFOs help hospitals recover after Joplin tornado, Hurricane Sandy

Leaders from Mercy Joplin Hospital, Partners HealthCare, South Nassau Communities Hospitals explain how their systems bounced back.

Susan Morse, Managing Editor

Shelly Hunter, chief financial officer at Mercy Hospital Joplin, stands in front of a new hospital built to replace one that was destroyed by the Joplin tornado.Shelly Hunter, chief financial officer at Mercy Hospital Joplin, stands in front of a new hospital built to replace one that was destroyed by the Joplin tornado.

"You don't expect your whole building to be blown out."

No amount of preparation for Mercy Hospital Joplin CFO Shelly Hunter could have prepared the facility for the kind of damage she saw when a F5 tornado barreled through Joplin, Missouri on May 22, 2011. The then-named St. John Regional Medical Center took a direct hit, the twister shattering windows and tearing apart structural supports. There was no emergency power back-up; the generator was destroyed.

The storm killed 161 people. Five of those were patients at the hospital.

HIMSS20 Digital

Learn on-demand, earn credit, find products and solutions. Get Started >>

"We had just gone through disaster drills," Hunter said. "But in all drills, one assumes the building is still standing."

In the four years since the storm, the hospital has been rebuilt and opened this spring. However, Hunter, and other hospital execs who have managed through natural disasters, say there are several financial safeguards healthcare providers across the country can use to better prepare for when Mother Nature strikes. But all say there's only so much you can prepare for.

After the tornado destroyed the hospital, the Federal Emergency Management Agency gave officials $33 million of the $434 million needed to rebuild a new Mercy Hospital Joplin.

[Also: See photos of storm damage and the newly opened Mercy Joplin]

The hospital may be eligible for $20 million more. 

"We don't know until we complete all of the FEMA submission requirements and receive approval," Hunter said. "They will give a portion of the part not covered by insurance. You're never 100 percent covered on anything."

It represents among the largest claims in their insurance companies' disaster history, Hunter said.

If FEMA does not declare a federal disaster, the loss can be considered an operational expense, she said.

"It's a very complicated and in-depth process," said Hunter, who is still navigating through it four years later. "Make sure you know your insurance policy and connect with FEMA right away and ask for help. Understand your business insurance policy and what is covered; what is the period of indemnity; what is negotiable. You need to really understand what your limitations are and have specifics on rebuilds. You need to understand the deductible parameters."

In addition to the cost of rebuilding, revenue saw a significant decrease during the transition, Hunter said.

"We had a 20 percent drop in market share," Hunter said. "We had significant losses trying to maintain our infrastructure with less revenue."

The Superstorm

South Nassau Communities Hospitals Chief Financial Officer Mark Bogen waded through similar financial muck in 2012 after Hurricane Sandy swamped a chronic dialysis center it ran on Long Beach, a barrier-island city in Long Island, New York, on the border for Queens.

"It took us from November 2012 through June of last year to finalize the claim, however it took us less than six months, November 2012 to April 2013 to rebuild," Bogen said. "That took $4 to $5 million."

In rebuilding, they wanted to add in some hardening construction features.

[Also: Emergency facility opens near site of hospital destroyed by Sandy]

"The insurance company only wanted to rebuild what was there," he said. "We did file a small FEMA claim and got some money back. About 90 percent of the hardening was paid by FEMA and 10 percent was paid under a separate Community Development Block Grant."

Bogen has been in the healthcare business for 38 years, as an auditor, CFO and consultant.

"Like most finance guys, I don't know how much value is on the property, or have read all the riders," he said. "You've got to know what you're buying, you have to understand all the fine print, because in our case, it made the difference between a $50,000 and $500,000 deductible in how we reported the incident. If we had said 'from a flood,' because of flood insurance, it would be the higher amount. The way we described it, technically, we never called it a hurricane."

Technically, Sandy hit New York with hurricane-force winds as a post-tropical cyclone.

Most of the negotiations with the insurance company focused on calculating the loss caused by the business interruption, he said.

"We didn't get everything we asked for," Bogen said. "We felt the settlement versus the cost to purse was worth accepting. It took us over a year. We probably got close to 70 percent of what we asked for."

However, he said, "We probably lost $4 million in operations in 2012 that pretty much related to the post-Sandy situation." That was the only year in the eight Bogen has been with South Nassau that the hospital system lost money, he said. This was largely due to an influx of patients; the need to keep patients in the hospital who would normally have been discharged; and the resulting staffing shortage. In some cases, patients who would have gone home no longer had homes.

"We unexpectedly had to reopen a couple of nursing units that were being closed for renovation." Bogen said. "We had to scramble for staff, paying a lot of overtime and agency costs we weren't expecting to. We had cash on hand. Fortunately we were in a good financial position."

South Nassau received no other reimbursement because of the extended stays.

"It was a significant amount, a lot," said Bogen.

Fortunately, Bogen said, South Nassau had a strong enough balance sheet to float 60 percent of the final cost in advance.

The nearby Long Beach Medical Center was not in such a good financial position, he said. The hospital and nursing home -- which was evacuated the week before Sandy – filed for bankruptcy after Sandy destroyed the hospital. At the time, it only scored a single $1 million payment from insurance, according to Bogen.

To save money, Long Beach had reduced its insurance coverage. It also couldn't afford to wait years to rebuild.

South Nassau Communities Hospital acquired Long Beach's assets and with $22 million in state grant funding, built an urgent care facility and then an emergency department at Long Beach which opened in August.

Snowpocalypse

Massachusetts General is always ready for snow, but this past winter the length and breadth of the storms wore it down over time, rather than overwhelmed it in one big disaster like Hurricane Sandy and the Joplin tornado.

"Nine feet in total," said Dr. Paul Biddinger, who is medical director for Emergency Preparedness at the hospital. "While we are used to it being difficult for employees and patients at the time of the snow, it was extraordinary how long it took."

Massachusetts General never lost power, but the real issue was similar to South Nassau: capacity.

[Also: Partners HealthCare loses millions after harsh Boston winter]

"It had a significant operational impact that was somewhat unanticipated," Biddinger said. "All hospitals have to operate pretty full, if there's any disruption in flow you effectively lose beds. With the snowstorms we couldn't discharge patients who lived alone or that the nursing homes couldn't take. We were completely full, there was no room for incoming patients … There's never a time when you can add 10 to 20 percent volume back into the system."

When the Boston's public transportation shut down, employees who normally took the subway or bus had to drive to work, where there was limited parking. The hospital rented parking space nearby.

"That ended up being moderately expensive and snow removal was expensive; just to keep our parking lots open was a significant burden," Biddinger said. "It was hundreds of thousands over budget. Our snow removal budget is over a million."

Expenses over the ordinary were flagged for submission to the federal government should a federal disaster be declared, as it was in the case when winter storm Juno dumped more than three feet of snow on the region in January. Still, said Biddinger, the reimbursement was only about 70 percent of the actual cost.

Biddinger and others at the hospital are now looking at what to do next time.

"The biggest question we're wrestling with is, how to manage capacity in anticipation of a major snowstorm event," Biddinger said. "Should we actually be trying to open up capacity ahead of the storm in order to have room to still do surgical procedures, so we're not backlogged? The question is whether it's financially advantageous. We don't know the answer."

First survive

When disaster strikes, as it did Joplin, Missouri, no one is thinking about the cost in the immediate aftermath.

Though Joplin lies next to the bordering states of Oklahoma and Kansas, just outside of tornado alley, there was little warning.

"We had about a 10-minute warning," said Hunter, who was not at the hospital that Sunday. "It was a sunny day, we didn't expect it."

Doctors, nurses and staff did as they had drilled and got many of the 117 patients who were in the hospital into a secure hallway.

The building's exterior walls stood but winds over 200 miles-per-hour blew out hospital windows, interior walls and ceilings. Steel support beams curved and twisted.

The life flight helicopter was blown away and destroyed. Vehicles in the parking lot were also thrown and mangled.

One of two emergency room doctors at St. John's Regional Medical Center told a local publication that he and another staffer took cover under a desk, comparing the sound of the wind to that of a locomotive ripping through the hospital.

"The whole hospital shook and vibrated as we heard glass shattering, light bulbs popping, walls collapsing, people screaming, the ceiling caving in above us and water pipes breaking, showering water down on everything," Dr. Kevin Kikta told The City Wire.

The tornado lasted all of 45 seconds, he said.

As soon as it was over, hundreds of people, including Hunter, came to the facility to help.

"We got all the patients out in 90 minutes, there were no additional injuries," Hunter said. "We were able to secure the building that evening." Patients were transported to other facilities, though not in Joplin, as the one other area hospital that could handle such casualties was overrun with wounded.

Without power or lights, people communicated by text and runners, she said. Mercy Health System sent workers back to the hospital that night. They began pulling servers out of the wreckage and set up a satellite dish.

"I was able to work the next day on my computer," said Hunter, who used the Holiday Inn Joplin Convention Center as an office.

Within a week, the hospital resumed operations in a MASH-type field tent. Electronic medical records were printed at other Mercy locations and mailed.

In 2011, Hunter, an 18-year veteran of the healthcare industry, had been CFO in Joplin for two years and after the storm helped navigate the hospital through its days operating out of the tent, to a move to a modular facility in September 2011, to a new building in 2012 and into the present 600,000 square-foot facility that is four times larger and much stronger.

A new and reinforced concrete Mercy Hospital Joplin reopened this past March.

The $434 million facility received $132 million from the Mercy Health System, $15 million more from philanthropy, an unidentified amount in insurance money, and so far, $33 million from Federal Emergency Management Agency. The new hospital has storm-hardening features, including concrete in the roof and facade.

Officials also used the opportunity to update the new facility to fit more with the patient-centered care model that is reinventing the industry. The old hospital, built around 1967, with a tower added in 1984, had 365 beds.

The new facility has 224 beds and can expand up to 260. It's more focused on wellness and how patients want to receive care, and less on long-term inpatient care, according to Hunter.

"Healthcare has drastically changed," Hunter said. "We're seeing a trend towards outpatient care."

Since waiting for demolition of the original building before rebuilding would have taken a year longer, Hunter said, they chose a new site since they wanted to start construction sooner and retain their skilled labor.

"We have broken construction and design records," Hunter said. "We did design and planning at same time.  We started excavation as we were still designing the building."

Over the past five years, the Mercy Health System has invested a billion dollars in Joplin, into its changing hospital facilities and payroll, according to Hunter. The community too has been supportive. Mercy donated the former hospital site to the city for community purposes.

"We've been very fortunate," Hunter said.

The new building is designed to withstand winds of 250 mph and to have the best look and feel for the patient.

"Really it was patient-directed," Hunter said. "I'm really proud of this. We're happy to be fully back in business after four years."