Read more in the Philadelphia Inquirer

The COVID-19 pandemic has financially squeezed Philadelphia-area health systems, because they are not treating patients with needs that are not urgent and are paying extra costs to prepare for a surge in coronavirus victims.

Already, Shore Memorial Medical Center and Trinity Health Mid-Atlantic, which owns five hospitals in the region, have announced buyouts and furloughs. More are expected. Standard & Poor’s estimated this week that hospital revenues and patient volumes are 40% below what they would normally be.

In a bid to relieve some of the pressure, Pennsylvania Treasurer Joe Torsella launched a program to spend up to $240 million buying a form of variable-rate debt owed by Pennsylvania hospitals. The goal is to keep interest rates down for health systems, helping them preserve cash.

Before the federal CARES Act passed last week, the interest rate for these bonds spiked as high as 7.28% from less than 1% a few weeks ago, the Treasury Department said, citing Bloomberg data. The state would cap the interest rate at 2%.

Rates have since come down dramatically, but the effort could still be helpful, Bloomberg municipal bond analyst Eric Kazatsky said Friday. “If we get illiquid again, they have a program in place,” he said. Profit margins have been hard hit, and investors are reconsidering how much risk they are comfortable with, he said.

The program is restricted by credit rating to the most well-off health systems and to those that already have this form of debt outstanding, which means that it will not add much new liquidity. In the state, at least a dozen health systems and individual hospitals have the debt, according to data Kazatsky provided.

The state said it is considering more than $2 billion in bonds for the program, but it has not identified which it will buy. The program is limited to $50 million for any one borrower.

How much money in interest payments will be saved is unclear. “In this fragile market, it is difficult to pinpoint exact savings while interest rates remain volatile,” a Treasury spokesperson said in an email.

In the Philadelphia region, the eligible group includes the University of Pennsylvania Health System, Thomas Jefferson University, and Children’s Hospital of Philadelphia, but not Temple University Health System or Einstein Healthcare Network.

Temple and Einstein, which don’t have eligible debt outstanding, struggled financially even before the coronavirus upended life because so many of their patients have government insurance, either Medicare or Medicaid, which generally doesn’t cover the full cost of care.

“The bond purchasing program is intended to benefit the broader market,” the Treasury Department said. Bonds must be rated A or higher for the state to be allowed to buy them.

In times of financial stress, the number of days a health system could pay operating expenses without bringing in any new revenue is a key measure. On Dec. 31, that number was 235 days for Penn Health and 200 for Jefferson, but only 102 for Einstein. Temple generally has an even lower number.

Neither Temple nor Einstein responded to requests for comment.

The CARES Act allows hospitals to apply for three months of advanced Medicare payments. The law also earmarks $100 billion in additional money to help hospitals withstand the financial turmoil caused by the crisis, but federal officials have not yet determined how those funds will be distributed.

The Pennsylvania Department of Human Services, which manages Medicaid programs, is exploring “options that will aid hospitals that are experiencing cash flow issues,” a spokesperson said without providing specifics.

Some health systems are taking matters into their own hands. The University of Pittsburgh Medical Center, the state’s largest, according to Standard & Poor’s, is in the process of obtaining a line of credit and bank loans totaling $2 billion “for potential working capital and other needs during this time.”