Omicron compounds employee scarcity, provide chain woes for retailers

One shelf stands empty while customers shop in Columbus, Ohio.

Matthew Hatcher | Getty Images News | Getty Images

Shorten store opening hours, temporarily close locations, and send letters of apology to customers for long lines and late appointments.

These are some of the unusual steps retailers and restaurants are taking when Covid cases rise across the country, fueled by the fast-spreading variant of Omicron.

Corporations no longer worry about state and local governments shutting down stores.

Instead, companies struggle with labor shortages as people call in sick, become exposed to the virus, or seek childcare. And there is a risk of further supply chain problems as the highly contagious variant spreads around the world.

“There’s no question that staffing is definitely a big issue this time around,” said Stephanie Martz, chief administrative officer and general counsel for the National Retail Federation. “It was perhaps less measurable when we were at one point in the pandemic when so much was closed and everything so scaled down.”

“I don’t know if I would go as far as to say that we have an unprecedented number that can’t work, but it’s high,” she said. “It’s really high.”

Covid cases have increased. According to a CNBC analysis of data compiled by Johns Hopkins University through Thursday, the US reports a seven-day average of about 600,000 new cases each day, an all-time high, and up 72% from the previous week.

Source: Lauren Thomas, CNBC

An increasing number of sick, exposed or overworked workers has caused retailers and restaurants to take unusual steps as their existing work problems worsen. Macys Shortening hours of operation in locations across the country for the remainder of this month. Walmart almost 60 stores in coronavirus hotspots temporarily closed in December. And other employers, including Starbucks, Chipotle and Nike have been forced to close some of their doors as they simply don’t have enough people to keep them open.

Walgreens Sent an apology email to customers this week noting customer complaints about long lines, out of stock items, and delays in Covid vaccines or test appointments. In the note, the company’s executives mentioned the many tasks that pharmacy staff juggle – namely dispensing over 55 million Covid vaccines and more than 23 million Covid tests while filling out over a billion prescriptions annually.

“The system has been under heavy load,” said James Kehoe, chief financial officer of Walgreens, on a conference call on Thursday on the company’s results. He said the company will spend around $ 120 million more on workers to help its elongated, thin workforce.

Morgan Harris is the shop owner of the Green Bambino in Oklahoma City. She said the store, which sells baby items from toys to strollers, is facing staff shortages and she feared it could get worse.

Morgan Harris

Regular opening times go ‘out of the window’

For understaffed retailers, reducing working hours is one of the first logical steps, said Craig Rowley, senior client partner at Korn Ferry and director of the company’s retail division. Some stores will be scaled back on weekdays when only a small percentage of sales are happening compared to busier weekends, he said.

He said pandemic-related changes could lead retailers to permanently rethink store opening hours, especially as more sales go online.

“The labor shortage of [Covid] goes to almost any customer-facing business, “said Rowley.

Morgan Harris owns Green Bambino, an Oklahoma City store that sells baby items such as onesies, diapers, and toys. She said she had to ditch one of the most important retail rules as it operates with four employees – less than half of the 10-15 people she would have expected. The store had to change its schedule. It is now open five days a week instead of seven.

Now she sees some corporate giants doing the same when they are hit by the “Great Resignation” and further squeezed by the wave of omicrones.

“In the past, you never changed your opening times in retail,” she said. “That’s out the window.”

Some companies have gotten better at using technology to notify customers of staff shortages or store closures. For example, a understaffed Chipotle location can turn off digital orders through their app and instead focus on in-store transactions while nearby restaurants take delivery and online orders.

Rowley said the good news is that retailers and restaurant chains at least survived the vacation rush. “The workforce is no longer what it was before Christmas, so companies have that advantage,” he said.

Retailers could even ask temporary vacationers to stay in the New Year and work extra hours, he added.

However, Harris said she feared Green Bambino may have to deal with leaner staff even if sales skyrocket. Annual sales rose to nearly $ 900,000 last year – 23% more than in 2020 and 14% more than before the pandemic in 2019.

Applications have slowed down to a trickle despite seeking the help of a recruiter. And she said the omicron wave hasn’t reached the region yet – which could mean more employees calling in sick.

“I assume that our staff will continue to shrink and not get bigger,” she said. “I have very little hope that all of a sudden we will find all these great people and attract them.”

In addition, the recent wave of the pandemic could further delay the return to continuous deliveries of popular baby items such as car seats and strollers. The business is pulling out of the furniture business due to delivery delays and higher freight costs. It stopped accepting deposits for many items because it couldn’t predict if – or when – those large items would be back in stock.

“I don’t feel like I’m reinventing business every two weeks like I was in 2020, but we have no idea what business to do after the pandemic,” she said. “The uncertainty will linger for a few more months, if not longer.”

A customer waits for a contactless roadside pickup at the Recreational Equipment Inc. (REI) flagship store in Seattle, Washington, USA on Thursday, May 14, 2020.

Chona Kasinger | Bloomberg | Getty Images

Muscle memory

Shoppers, on the other hand, have continued to spend money – even with some browsing online rather than down aisles or switching to roadside pickup or home delivery, which have become part of their muscle memory.

According to a survey by Coresight Research of more than 500 US consumers on December 27, compared to the previous weeks, avoiding some public places has crept in again slightly. An increasing number of consumers said they were withdrawing from activities such as international travel and using public transport. Almost 66% of respondents said they avoid any public place – up from 62% when the survey was conducted on December 13th.

About 38% of respondents said they avoided shopping malls and shopping malls and about 33% said they avoided restaurants, bars and cafes, up from 32% and 30% two weeks ago.

However, the company’s survey showed no significant changes in what consumers were buying or how much they were spending.

The hospitality industry may find itself in another downturn. Restaurant analyst Black Box Intelligence found that restaurant sales declined for the first time since mid-March in the week ending December 26, but the reversal was largely due to Christmas, which fell on a weekend that year, and the rise in omicrones .

OpenTable data shows that in the United States, fewer seats were reserved with online, phone, and walk-in reservations in the first week of 2022 compared to pre-pandemic levels, but consumers could have take-away switch or try to stick to New Year’s resolutions.

If that happens, it could mean Americans are spending on things rather than services. Christmas sales were well on their way to hitting a record high of up to 11.5%, according to the National Retail Federation. (The final numbers won’t be released until the end of next week.)

The retail company’s chief economist, Jack Kleinhenz, said: Increased consumer appetites for goods and reluctance to spend on travel, restaurants and other expenses could fuel inflation.

John Mercer, research director at Coresight Research, said that for the most part, shoppers “roll their eyes, take a deep breath, and sigh, and then move on as much as possible.”

“It’s very different this time,” he said. “Consumers were jabbed twice, three times. You have seen this before. It’s really obvious that Omicron is generally much weaker in other countries. “

Almost three in four Americans are fully vaccinated as of Thursday, according to the Centers for Disease Control and Prevention. To date, 73 million people have received a booster vaccination – that’s roughly 22% of the US population. And on Wednesday the CDC gave the go-ahead Pfizer and BioNTech‘s Covid Booster Shots for children from 12 to 15 years.

And there is some evidence suggests that Omicron is milder than previous variants, according to World Health Organization officials.

That could begin to change the outlook for Americans who get sick. The country reports an average of around 1,250 deaths per day, Hopkins data shows, well below the record highs after last year’s Christmas season, when the daily average was above 3,000 for about a month from January 2021. The death toll tends to fall, but the number of cases and hospital admissions increases.

Martz of NRF said both retailers and consumers understand the coronavirus better. That has led to a greater emphasis on tools like booster shots, home Covid tests, and better masks, rather than wiping down counters or installing Plexiglas panels.

One way the industry is moving forward is to host their annual conference in person. NRF’s Big Show is next week in New York City at the Javits Center – previously a mega-center for Covid vaccines and possibly the source of the first known case of omicron spread in the United States.

Martz admitted the conference will look different than it did before the pandemic. All participants must wear a mask and present a vaccination card. The booths in the showroom may have fewer staff. And the trading group will distribute Covid tests at home and host a mobile testing unit.

Up to 20,000 visitors are expected – around half of the visitors in 2019.

Still, she said, it feels right to move forward as the frontline retail workers go to work in person, day in and day out.

“We believe this is a reasonable time to somehow get back together,” she said, although “it won’t look like our shows have done in the past.”

CNBCs Nate Rattner, Lauren Thomas, and Amelia Lucas contributed to this report.

Deep discounters like Greenback Tree get hit by soar provide chain prices

A man enters a Dollar Tree discount store in Garden City, New York.

Shannon Stapleton | Reuters

When a chartered ship for Money tree Arrived in China to load goods, a single crew member’s positive Covid-19 test forced the ship to turn back. The trip was delayed by two months.

CEO Mike Witynski shared this story and other shipping problems during a phone call on Thursday. He spoke bluntly about supply chain confusion and labor shortages. And he said they made it harder for the retailer, who sells most of their items for a dollar. And they are expected to continue into next year.

“The Dollar Tree banner is more freight sensitive than others in the industry,” he said.

Dollar Tree said Thursday that rising freight costs will push its earnings $ 1.50 to $ 1.60 per share – more than double the 60 cents forecast in May to 65 cents. Estimated earnings per share for the fiscal year will be between $ 5.40 and $ 5.60, which was lower than analysts expected.

The company’s shares closed 12.08% to $ 93.48 on Thursday.

Deep discounters are feeling the pain as Covid outbreaks and congested ports drive up the cost of shipping goods around the world. Dealers like Dick’s sporting goods, Best buy and Williams-Sonomareported higher gains this week. These companies found that fewer promotions did not dampen their customers’ willingness to buy. Some said they pay more to move goods quickly – such as flying goods on airplanes – and buyers are still buying.

However, at low cost retailers, buyers cannot afford to pay more or will walk away if the item doesn’t look like a bargain. This puts retailers in a bind as they have to decide when to raise prices and when to absorb higher costs.

“I would tell you that we were very careful in passing on prices because we know that our core customers find it difficult to afford many price increases.” Dollar general CEO Todd Vasos said on a conference call on Thursday.

Shares in the rival dollar store chain closed 3.77% to $ 225.90 on Thursday.

The off-price retailers – who also appeal to price-conscious shoppers – all fell on Thursday. Ross Stores, TJ Maxx and Burlington Stores closed by about 4%, 3% and 9%, respectively, early Thursday afternoon. Nordstrom, which also includes Nordstrom Rack, closed around 8%.

Some have detailed how to deal with the headwind.

Dollar General’s Vasos said the retailer is negotiating with vendors and has swapped some items for similar ones over the past few quarters to keep prices down.

Dollar Tree’s Witynski said the retailer had reserved its own spot on charter ships for the first time – including signing a three-year contract for a large ship. More U.S. goods were being purchased, so the Dollar Tree and Family Dollar stores were well stocked for the back-to-school season. And it prioritizes shipping containers depending on which goods are in season or in demand.

It will also continue to order seasonal purchases 30 days earlier than usual and monitor shipping availability in ports in China and the US

On the conference call, the company’s executives pointed to the predictions of industry experts that maritime shipping capacity will normalize no later than 2023 as more ships become available.

However, CFO Kevin Wampler admitted the rapidly changing environment during the pandemic – and said it made it difficult to estimate future freight costs.

“There could be another Covid outbreak,” he said. “There could be a lot of different things that could affect this. I think you have to keep in mind that it is probably the most dynamic thing we have ever seen in relation to this market. “

—CNBCs Robert Hum contributed to this report.

In Alleged Well being Care ‘Cash Seize,’ Nation’s Largest Hospital Chain Cashes In on Trauma Facilities

After falling from a ladder and cutting his arm, Ed Knight said, he found himself at Richmond, Virginia’s Chippenham Hospital surrounded by nearly a dozen doctors, nurses and technicians — its crack “trauma team” charged with saving the most badly hurt victims of accidents and assaults.

But Knight’s wound, while requiring about 30 stitches, wasn’t life-threatening. Hospital records called it “mild.” The people in white coats quickly scattered, he remembered, and he went home about three hours later.

“Basically, it was just a gash on my arm,” said Knight, 71. “The emergency team that they assembled didn’t really do anything.”

Nevertheless, Chippenham, owned by for-profit chain HCA Healthcare, included a $17,000 trauma team “activation” fee on Knight’s bill, which totaled $52,238 and included three CT scans billed at $14,000. His care should have cost closer to $3,500 total, according to claims consultant WellRithms, which analyzed the charges for KHN.

HCA Healthcare’s activation fees run as high as $50,000 per patient and are sometimes 10 times greater than those at other hospitals, according to publicly posted price lists. Such charges have made trauma centers, once operated mainly by established teaching hospitals, a key part of the company’s growth and profit-generating strategy, corporate officials have said. HCA’s stock has doubled in three years. The biggest U.S. hospital operator along with the Department of Veterans Affairs, HCA has opened trauma centers in more than half its 179 hospitals and says it runs 1 of every 20 such facilities in the country.

And it’s not slowing down.

HCA “has basically taken a position that all of their hospitals should be trauma centers,” said Dr. Robert Winchell, describing conversations he had with HCA officials. Winchell is a trauma surgeon and former chairman of the trauma evaluation and planning committee at the American College of Surgeons.

Trauma patients are typically those severely injured in automobile accidents or falls or wounded by knives or guns.

State or local regulators confer the designation “trauma center,” often in concert with standards verified by the American College of Surgeons. The status allows a cascade of lucrative reimbursement, including activation fees billed on top of regular charges for medical care. Trauma centers are mostly exempt from 1970s-era certificate-of-need laws enacted to limit excessive hospital spending and expansion. The bills for all this — reaching into tens of thousands of dollars — go to private insurers, Medicare or Medicaid, or patients themselves.

“Once a hospital has a trauma designation, it can charge thousands of dollars in activation fees for the same care seen in the same emergency room,” said Stacie Sasso, executive director of the Health Services Coalition, made up of unions and employers fighting trauma center expansion by HCA and others in Nevada.

HCA’s expansion into trauma centers alarms health policy analysts who suggest its motive is more about chasing profit than improving patient care. Data collected by the state of Florida, analyzed by KHN, shows that regional trauma cases and expensive trauma bills rise sharply after HCA opens such centers, suggesting that many patients classified as trauma victims would have previously been treated less expensively in a regular emergency room.

Patients admitted to HCA and other for-profit hospitals in Florida with a trauma-team activation were far more likely to be only mildly or moderately injured than those at not-for-profit hospitals, researchers have found.

HCA is “cherry-picking patients,” said Ed Jimenez, CEO of the University of Florida Health Shands, which runs a Level I trauma center, the highest designation. “What you find is an elderly person who fell and broke their hip who could be perfectly well treated at their local hospital now becomes a trauma patient.”

HCA’s trauma center expansion makes superior care available to more patients, providing “lifesaving clinical services while treating all critically injured patients,” said company spokesperson Harlow Sumerford.

Richmond’s population “is booming,” said Chippenham spokesperson Jeffrey Caldwell. “This increase in demand requires that the regional health care system keep up.”

Trauma Is Big Business

HCA’s trauma center boom picked up speed in Florida a decade ago and has spread to its hospitals in Virginia, Nevada, Texas and other states. It has sparked fierce fights over who handles highly profitable trauma cases and debates over whether costs will soar and care suffer when rival centers go head-to-head competing for patients.

“There’s no question it’s a money grab” by HCA, said Jimenez, who was part of a largely unsuccessful effort to stop HCA’s trauma center expansion in Florida. “It was clear that their trauma activation fees were five or six times larger than ours.”

In a process shielded from public view in Virginia, Chippenham recently applied for and won the highest trauma center designation, Level I, providing the most sophisticated care — and putting it squarely in competition with nearby VCU Health. VCU has run the region’s only Level I facility for decades. In October, Chippenham announced a contract for its own helicopter ambulance, which gives it another way to increase its trauma business, by flying patients in from miles away. The Virginia Department of Health rejected KHN’s request to review HCA’s Chippenham trauma center application and related documents.

“This is a corporate strategy” by HCA “to grow revenue, maximize reimbursement and meet the interest of stockholders,” said Dr. Arthur Kellermann, CEO of VCU Health, who says his nonprofit, state-run facility is sufficient for the region’s trauma care needs. “Many people in the state should be concerned that the end result will be a dilution of care, higher costs and poorer outcomes.”

Chippenham’s Caldwell said the “redundancy” with VCU “allows the region to be better prepared for mass trauma events.”

Studies show trauma centers need high volumes of complex cases to stay sharp. Researchers call it the “practice makes perfect” effect. Patients treated for traumatic brain injuries at hospitals seeing fewer than six such cases a year died at substantially higher rates than such patients in more experienced hospitals, according to a 2013 study published in the Journal of Neurosurgery.

Another study, published in the Annals of Surgery, showed that a decrease as small as 1% in trauma center volume — because of competition or other reasons — substantially increased the risk that patients would die.

By splitting a limited number of cases, a competing, cross-town trauma center could set the stage for subpar results at both hospitals, goes the argument. The number of VCU’s admitted adult trauma patients decreased from nearly 3,600 in 2014, before Chippenham attained Level II status, to 3,200 in 2019, VCU officials said.

Chippenham was the only Level I center in Virginia that declined to disclose its trauma patient volume to KHN.

“People are trying to push the [trauma center] designation process beyond what may be good for the major hospitals that are already providing trauma care,” said Dr. David Hoyt, executive director of the American College of Surgeons, speaking generally. Local authorities who make those decisions, he said, can be “pressured by a hospital system that has a lot of economic pull in a community.”

Unlike regular emergency departments, Level I and Level II trauma centers make trauma surgeons, neurosurgeons and special equipment available round-the-clock. Centers with Levels III or IV designations offer fewer services but are still more capable than many emergency rooms, with round-the-clock lab services and extra training, for example.

Hospitals defend trauma team activation fees as necessary to cover the overhead of having a team of elite emergency specialists at the ready. At HCA hospitals they can run more than $40,000 per case, according to publicly posted charge lists, although the amount paid by insurers and patients is often less, depending on the coverage.

“Fees associated with trauma activation are based on our costs to immediately deploy lifesaving resources and measures 24/7,” said HCA spokesperson Sumerford, adding that low-income and uninsured patients often pay nothing for trauma care. “What patients actually pay for their hospital care has more to do with their insurance plan” than the total charges, he said.

There is no standard accounting for trauma-related costs incurred by hospitals. One method involves multiplying hourly pay for members of the trauma team by the potential hours worked. Hospitals don’t reveal calculations, but the wide variation in fees suggests they are often set with an eye on revenue rather than true costs, say industry analysts.

Reasonable charges for Knight’s total bill would have been $3,537, not $52,238, according to the analysis by WellRithms, a claims consulting firm that examined his medical records and Chippenham’s costs filed with Medicare. Given his minor injury, the $17,000 trauma activation fee “is not necessary,” said Dr. Ira Weintraub, WellRithms’ chief medical officer.

Often insurers pay substantially less than billed charges, especially Medicare, Knight’s insurer. He paid nothing out-of-pocket, and Chippenham collected a total of $1,138 for his care, HCA officials said after this article was initially published. But hospitals can maximize revenue by charging high trauma fees to all insurers, including those required to pay a percentage of charges, say medical billing consultants.

VCU Health charges up to $13,455 for trauma activation, according to its charge list.

Average HCA trauma activation charges are $26,000 in states where the company does business — three times higher than those of non-HCA hospitals, according to data from Hospital Pricing Specialists, a consulting firm that analyzed trauma charges in Medicare claims for KHN.

The findings are similar to those reported by the Tampa Bay Times in 2014, early in HCA’s trauma center expansion. The Times found that Florida HCA trauma centers were charging patients and insurers tens of thousands of dollars more per case than other hospitals.

Treating trauma patients in the ER is only the beginning of the revenue stream. Intensive inpatient treatment and long patient recoveries add to the income.

“We have more Level I, Level II trauma centers today than we have ever had in the company history,” HCA’s then-CEO, Milton Johnson, told stock analysts in 2016. “That strategy in turn feeds surgical growth. That strategy in turn feeds neurosciences growth, it feeds rehab growth.” Trauma centers attract “a certain cadre of high-value patients,” Dr. Jonathan Perlin, HCA’s chief medical officer, told analysts at a 2017 conference.

Patients at HCA’s largely suburban hospitals are more likely than those at an average hospital to carry private insurance, which pays much more than Medicare and Medicaid. More than half the company’s revenue in 2020 came from private insurers, regulatory filings show. Hospitals, in general, collect a little more than a third of their revenue from private insurers, according to the Department of Health and Human Services.

HCA’s trauma cases can fit the same profile. At Chippenham, in south Richmond, trauma cases are “90% blunt trauma,” according to the hospital’s online job posting last year for a trauma medical director. Blunt-trauma patients are generally victims of car accidents and falls and tend to have good insurance, analysts say.

VCU and other urban hospitals, on the other hand, treat a higher share of patients with gun and knife injuries — penetrating trauma — who are more often uninsured or covered by Medicaid. About 75% of VCU’s trauma cases are classified as blunt trauma, hospital officials said.

The 90% figure is “not accurate today,” Caldwell said. “Chippenham’s current mix of trauma type is aligned with that of other trauma centers in the region, and we treat traumas ranging from motor vehicle accidents to gunshots, stabbings and other critical injuries regularly.”

‘Trauma Drama’ in Florida and Beyond

HCA’s growth strategy is part of a wider trend. From 2010 to 2020 the number of Level I and Level II trauma centers verified by the American College of Surgeons nationwide increased from 343 to 567.

Nowhere has HCA added trauma centers more aggressively or the fight over trauma center growth been more acrimonious than in Florida. The state’s experience over the past decade may offer a preview of what’s to come in Virginia and elsewhere.

In the thick of the controversy, legislators stepped in to broker a 2018 truce — but only after the number of HCA trauma centers in the state had grown from one to 11 over more than a decade and helped spark an explosion in trauma cases, according to Florida Department of Health data.

News headlines called it “trauma drama.” Hospitals with existing centers repeatedly filed legal challenges to stop the expansion, with little effect. Florida’s governor at the time was Rick Scott, former chief executive of Columbia/HCA, a predecessor company to HCA.

After launching Level II centers across the state, HCA officials urged Florida regulators not to adopt CDC guidelines recommending severely injured patients be treated at the highest level of trauma care in a region — Level I, if available.

HCA “kept on working, working, working, working for 10 years” to gain trauma center approvals over objections, said Mark Delegal, who helped broker the legislative settlement as a lobbyist for large safety-net hospitals. “Once they had what they wanted, they were happy to lock the door behind them.”

HCA hospitals “serve the health care needs of their communities and adjust or expand services as those needs evolve,” said Sumerford.

As HCA added trauma centers, trauma-activation billings and the number of trauma cases spiked, according to Florida Department of Health data analyzed by KHN. Statewide, inpatient trauma cases doubled to 35,102 in the decade leading up to 2020, even though the population rose by only 15%. HCA’s share of statewide trauma cases jumped from 4% to 24%, the data shows.

Charges for trauma activations, also known as trauma alerts, for HCA’s Florida hospitals averaged $26,890 for inpatients in 2019 while the same fees averaged $9,916 for non-HCA Florida hospitals, the data shows. Total average charges, including medical care, were $282,600 per case in 2019 for inpatient trauma cases at HCA hospitals, but $139,000 for non-HCA hospitals.

HCA’s substantially higher charges didn’t necessarily result from patients with especially severe injuries, public university research found.

Over three years ending in 2014, Florida patients with sprains, mild cuts and other non-life-threatening injuries were “significantly more likely” to be admitted under trauma alerts at HCA hospitals and other for-profit hospitals than at nonprofit hospitals, according to research by University of South Florida economist Etienne Pracht and colleagues. HCA hospitals have admitted emergency department Medicare patients at substantially higher-than-average rates since 2011, suggesting that at other hospitals many would have been sent home, new research by the Service Employees International Union found.

“What’s going on with HCA is the Wall Street model they’re following,” said Pracht, who provided KHN with additional Florida Department of Health data showing soaring trauma cases. “And Wall Street’s not happy unless you’re expanding. They’re driven by the motive to keep the stock price high.”

Lobbying and Campaign Dollars

In Virginia, health care organizations need to go through a lengthy and public application process to add something as basic as a $1 million MRI imaging machine.

But to open or upgrade a trauma center, all that’s needed is the approval of the health commissioner after a confidential qualification procedure. Chippenham did not seek or obtain Level I verification from the American College of Surgeons before getting Level I approval from the state. It is ACS-verified as a Level II center and, Caldwell said, is seeking Level I status with ACS.

Virginia requires an “extensive application” and “in-depth” site reviews by experts before a hospital gains status as a trauma center, Dr. M. Norman Oliver, the commissioner, said in an email. “Chippenham Hospital met the requirements” to become a Level I center, he said.

Nearly 80% of HCA’s Level I and Level II trauma centers have been verified by the American College of Surgeons “and the others currently are pursuing this verification,” said HCA spokesperson Sumerford.

As in other states, HCA invests heavily in Virginia in political influence. Eleven Virginia lobbyists are registered with the state to advocate on HCA’s behalf. One lobbyist spent more than $5,000 from December 2019 through February 2020 treating public officials to reception spreads and meals at posh Richmond restaurants such as L’Opossum and Morton’s the Steakhouse, lobbying records submitted to Virginia’s Conflict of Interest and Ethics Advisory Council show. HCA’s political action committee donated $160,000 to state candidates last year, according to the records.

Like other hospital systems, HCA hires former paramedics for “EMS relations” or “EMS outreach” jobs. HCA’s EMS liaisons are expected to develop a “business plan, driving service line growth,” according to its employment ads.

Chippenham’s decision to start a helicopter ambulance operation last year to compete with others in transporting trauma patients surprised some public officials. HCA and its contractor had filed paperwork for the operation to be reimbursed by insurers when Richmond City Council members learned about it. Members “were not up to speed on this matter,” council member Kristen Larson told a May 2020 meeting of the Richmond Ambulance Authority, according to the minutes.

Chippenham’s air ambulance partner, private equity-owned Med-Trans, has been the subject of numerous media reports of patients saddled with tens of thousands of dollars in out-of-network surprise bills. It’s not unusual for air ambulances to charge $30,000 or more for transporting a patient from a highway accident or just across town, according to news reports.

Last year, 85% of Med-Trans flights for Virginia patients with health insurance were in-network, said a company spokesperson. But Med-Trans is out of network for Virginia members of Aetna and UnitedHealthcare, two of the state’s biggest carriers, said spokespeople for those companies. Med-Trans is part of Anthem Blue Cross Blue Shield’s network, an Anthem spokesperson said.

HCA runs trauma centers “really well,” said Winchell, who runs the Level I trauma center at NewYork-Presbyterian Weill Cornell Medical Center.

But “there are clearly areas of oversupply” for trauma centers generally, he said.

Instead of letting a drive for profits dictate trauma center expansion, health authorities need “objective and transparent metrics” to guide the designation of trauma centers, Winchell recently wrote in the Journal of the American College of Surgeons.

Free-market advocate “Adam Smith might have been a good economist,” he wrote, “but he would have been a very poor designer of trauma systems.”

KHN data editor Elizabeth Lucas contributed to this report.

KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism about health issues. Together with Policy Analysis and Polling, KHN is one of the three major operating programs at KFF (Kaiser Family Foundation). KFF is an endowed nonprofit organization providing information on health issues to the nation.

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In alleged well being care ‘cash seize,’ nation’s largest hospital chain cashes in on trauma facilities

After falling from a ladder and cutting his arm, Ed Knight said he found himself at Richmond’s Chippenham Hospital surrounded by nearly a dozen doctors, nurses and technicians — its crack “trauma team” charged with saving the most badly hurt victims of accidents and assaults.

But Knight’s wound, while requiring about 30 stitches, wasn’t life-threatening. Hospital records called it “mild.” The people in white coats quickly scattered, he remembered, and he went home about three hours later.

“Basically, it was just a gash on my arm,” said Knight, 71. “The emergency team that they assembled didn’t really do anything.”

Nevertheless, Chippenham, owned by for-profit chain HCA Healthcare, included a $17,000 trauma team “activation” fee on Knight’s bill, which totaled $52,238 and included three CT scans billed at $14,000. His care should have cost closer to $3,500 total, according to claims consultant WellRithms, which analyzed the charges for KHN.

Ed Knight was taken to Chippenham Hospital after cutting his arm in a fall from a ladder. For stitching up Knight's wound and sending him home after a few hours, Chippenham Hospital's charges exceeded $50,000, according to a claims document in the case.Ed Knight was taken to Chippenham Hospital after cutting his arm in a fall from a ladder. For stitching up Knight’s wound and sending him home after a few hours, Chippenham Hospital’s charges exceeded $50,000, according to a claims document in the case. [ JULIA RENDLEMAN | Julia Rendleman for Kaiser Health News ]

HCA Healthcare’s activation fees run as high as $50,000 per patient and are sometimes 10 times greater than those at other hospitals, according to publicly posted price lists. Such charges have made trauma centers, once operated mainly by established teaching hospitals, a key part of the company’s growth and profit-generating strategy, corporate officials have said. HCA’s stock has doubled in three years.

The biggest U.S. hospital operator along with the Department of Veterans Affairs, HCA has opened trauma centers in more than half its 179 hospitals. It operates trauma centers at 11 of its more than 40 Florida hospitals and says it runs 1 of every 20 such facilities in the country.

And it’s not slowing down.

HCA “has basically taken a position that all of their hospitals should be trauma centers,” said Dr. Robert Winchell, describing conversations he had with HCA officials. Winchell is a trauma surgeon and former chairman of the trauma evaluation and planning committee at the American College of Surgeons.

Average HCA trauma activation charges are $26,000 in states where the company does business — three times higher than those of non-HCA hospitals, according to data from Hospital Pricing Specialists, a consulting firm that analyzed trauma charges in Medicare claims for KHN.

The findings are similar to those reported by the Tampa Bay Times in 2014, early in HCA’s trauma center expansion. The Times found that Florida HCA trauma centers were charging patients and insurers tens of thousands of dollars more per case than other hospitals.

Related: How HCA turned trauma into a money-maker

Trauma patients are typically those severely injured in automobile accidents or falls or wounded by knives or guns.

State or local regulators confer the designation “trauma center,” often in concert with standards verified by the American College of Surgeons. The status allows a cascade of lucrative reimbursement, including activation fees billed on top of regular charges for medical care. Trauma centers are mostly exempt from 1970s-era certificate-of-need laws enacted to limit excessive hospital spending and expansion. The bills for all this — reaching into tens of thousands of dollars — go to private insurers, Medicare or Medicaid, or patients themselves.

“Once a hospital has a trauma designation, it can charge thousands of dollars in activation fees for the same care seen in the same emergency room,” said Stacie Sasso, executive director of the Health Services Coalition, made up of unions and employers fighting trauma center expansion by HCA and others in Nevada.

HCA’s expansion into trauma centers alarms health policy analysts who suggest its motive is more about chasing profit than improving patient care. Data collected by the state of Florida, analyzed by KHN, shows that regional trauma cases and expensive trauma bills rise sharply after HCA opens such centers, suggesting that many patients classified as trauma victims would have previously been treated less expensively in a regular emergency room.

Patients admitted to HCA and other for-profit hospitals in Florida with a trauma-team activation were far more likely to be only mildly or moderately injured compared with those at not-for-profit hospitals, researchers have found.

HCA is “cherry-picking patients,” said Ed Jimenez, CEO of the University of Florida Health Shands, which runs a Level I trauma center, the highest designation. “What you find is an elderly person who fell and broke their hip who could be perfectly well treated at their local hospital now becomes a trauma patient.”

HCA’s trauma center expansion makes superior care available to more patients, providing “lifesaving clinical services while treating all critically injured patients,” said company spokesperson Harlow Sumerford.

Richmond’s population “is booming,” said Chippenham spokesperson Jeffrey Caldwell. “This increase in demand requires that the regional health care system keep up.”

Trauma is big business

HCA’s trauma center boom picked up speed in Florida a decade ago and has spread to its hospitals in Virginia, Nevada, Texas and other states. It has sparked fierce fights over who handles highly profitable trauma cases and debates over whether costs will soar and care suffer when rival centers go head-to-head competing for patients.

“There’s no question it’s a money grab” by HCA, said Jimenez, who was part of a largely unsuccessful effort to stop HCA’s trauma center expansion in Florida. “It was clear that their trauma activation fees were five or six times larger than ours.”

In a process shielded from public view in Virginia, Chippenham recently applied for and won the highest trauma center designation, Level I, providing the most sophisticated care — and putting it squarely in competition with nearby VCU Health. VCU has run the region’s only Level I facility for decades. In October, Chippenham announced a contract for its own helicopter ambulance, which gives it another way to increase its trauma business by flying patients in from miles away. The Virginia Department of Health rejected KHN’s request to review HCA’s Chippenham trauma center application and related documents.

“This is a corporate strategy” by HCA “to grow revenue, maximize reimbursement and meet the interest of stockholders,” said Dr. Arthur Kellermann, CEO of VCU Health, who says his nonprofit, state-run facility is sufficient for the region’s trauma care needs. “Many people in the state should be concerned that the end result will be a dilution of care, higher costs and poorer outcomes.”

Chippenham’s Caldwell said the “redundancy” with VCU “allows the region to be better prepared for mass trauma events.”

Studies show trauma centers need high volumes of complex cases to stay sharp. Researchers call it the “practice makes perfect” effect. Patients treated for traumatic brain injuries at hospitals seeing fewer than six such cases a year died at substantially higher rates than such patients in more experienced hospitals, according to a 2013 study published in the Journal of Neurosurgery.

Another study, published in the Annals of Surgery, showed that a decrease as small as 1% in trauma center volume — because of competition or other reasons — substantially increased the risk that patients would die.

By splitting a limited number of cases, a competing, cross-town trauma center could set the stage for subpar results at both hospitals, goes the argument. The number of VCU’s admitted adult trauma patients decreased from nearly 3,600 in 2014, before Chippenham attained Level II status, to 3,200 in 2019, VCU officials said.

Chippenham was the only Level I center in Virginia that declined to disclose its trauma patient volume to KHN.

“People are trying to push the [trauma center] designation process beyond what may be good for the major hospitals that are already providing trauma care,” said Dr. David Hoyt, executive director of the American College of Surgeons, speaking generally. Local authorities who make those decisions, he said, can be “pressured by a hospital system that has a lot of economic pull in a community.”

Unlike regular emergency departments, Level I and Level II trauma centers make trauma surgeons, neurosurgeons and special equipment available around the clock. Centers with Levels III or IV designations offer fewer services but are still more capable than many emergency rooms, with round-the-clock lab services and extra training, for example.

Hospitals defend trauma team activation fees as necessary to cover the overhead of having a team of elite emergency specialists at the ready. At HCA hospitals they can run more than $40,000 per case, according to publicly posted charge lists, although the amount paid by insurers and patients is often less, depending on the coverage.

“Fees associated with trauma activation are based on our costs to immediately deploy lifesaving resources and measures 24/7,” said HCA spokesperson Sumerford, adding that low-income and uninsured patients often pay nothing for trauma care. “What patients actually pay for their hospital care has more to do with their insurance plan” than the total charges, he said.

There is no standard accounting for trauma-related costs incurred by hospitals. One method involves multiplying hourly pay for members of the trauma team by the potential hours worked. Hospitals don’t reveal calculations, but the wide variation in fees suggests they are often set with an eye on revenue rather than true costs, say industry analysts.

Reasonable charges for Knight’s total bill would have been $3,537, not $52,238, according to the analysis by WellRithms, a claims consulting firm that examined his medical records and Chippenham’s costs filed with Medicare. Given his minor injury, the $17,000 trauma activation fee “is not necessary,” said Dr. Ira Weintraub, WellRithms’ chief medical officer.

Often insurers pay substantially less than billed charges, especially Medicare, Knight’s insurer. He paid nothing out-of-pocket, and Chippenham collected a total of $1,138 for his care, HCA officials said after this article was initially published. But hospitals can maximize revenue by charging high trauma fees to all insurers, including those required to pay a percentage of charges, say medical billing consultants.

VCU Health charges up to $13,455 for trauma activation, according to its charge list.

Average HCA trauma activation charges are $26,000 in states where the company does business — three times higher than those of non-HCA hospitals, according to data from Hospital Pricing Specialists, a consulting firm that analyzed trauma charges in Medicare claims for KHN.

Treating trauma patients in the ER is only the beginning of the revenue stream. Intensive inpatient treatment and long patient recoveries add to the income.

“We have more Level I, Level II trauma centers today than we have ever had in the company history,” HCA’s then-CEO, Milton Johnson, told stock analysts in 2016. “That strategy in turn feeds surgical growth. That strategy in turn feeds neurosciences growth, it feeds rehab growth.” Trauma centers attract “a certain cadre of high-value patients,” Dr. Jonathan Perlin, HCA’s chief medical officer, told analysts at a 2017 conference.

Patients at HCA’s largely suburban hospitals are more likely than those at an average hospital to carry private insurance, which pays much more than Medicare and Medicaid. More than half the company’s revenue in 2020 came from private insurers, regulatory filings show. Hospitals, in general, collect a little more than a third of their revenue from private insurers, according to the Department of Health and Human Services.

HCA’s trauma cases can fit the same profile. At Chippenham, in south Richmond, trauma cases are “90% blunt trauma,” according to the hospital’s online job posting last year for a trauma medical director. Blunt-trauma patients are generally victims of car accidents and falls and tend to have good insurance, analysts say.

VCU and other urban hospitals, on the other hand, treat a higher share of patients with gun and knife injuries — penetrating trauma — who are more often uninsured or covered by Medicaid. About 75% of VCU’s trauma cases are classified as blunt trauma, hospital officials said.

The 90% figure is “not accurate today,” Caldwell said. “Chippenham’s current mix of trauma type is aligned with that of other trauma centers in the region, and we treat traumas ranging from motor vehicle accidents to gunshots, stabbings and other critical injuries regularly.”

‘Trauma drama’ in Florida and beyond

HCA’s growth strategy is part of a wider trend. From 2010 to 2020 the number of Level I and Level II trauma centers verified by the American College of Surgeons nationwide increased from 343 to 567.

Nowhere has HCA added trauma centers more aggressively or the fight over trauma center growth been more acrimonious than in Florida. The state’s experience over the past decade may offer a preview of what’s to come in Virginia and elsewhere.

In the thick of the controversy, legislators stepped in to broker a 2018 truce — but only after the number of HCA trauma centers in the state had grown from one to 11 over more than a decade and helped spark an explosion in trauma cases, according to Florida Department of Health data.

News headlines called it “trauma drama.” Hospitals with existing centers repeatedly filed legal challenges to stop the expansion, with little effect. Florida’s governor at the time was Rick Scott, former chief executive of Columbia/HCA, a predecessor company to HCA.

After launching Level II centers across the state, HCA officials urged Florida regulators not to adopt CDC guidelines recommending severely injured patients be treated at the highest level of trauma care in a region — Level I, if available.

HCA “kept on working, working, working, working for 10 years” to gain trauma center approvals over objections, said Mark Delegal, who helped broker the legislative settlement as a lobbyist for large safety-net hospitals. “Once they had what they wanted, they were happy to lock the door behind them.”

HCA hospitals “serve the health care needs of their communities and adjust or expand services as those needs evolve,” said Sumerford.

As HCA added trauma centers, trauma-activation billings and the number of trauma cases spiked, according to Florida Department of Health data analyzed by KHN. Statewide, inpatient trauma cases doubled to 35,102 in the decade leading up to 2020, even though the population rose by only 15%. HCA’s share of statewide trauma cases jumped from 4% to 24%, the data shows.

Charges for trauma activations, also known as trauma-alerts, for HCA’s Florida hospitals averaged $26,890 for inpatients in 2019 while the same fees averaged $9,916 for non-HCA Florida hospitals, the data shows. Total average charges, including medical care, were $282,600 per case in 2019 for inpatient trauma cases at HCA hospitals, but $139,000 for non-HCA hospitals.

HCA’s substantially higher charges didn’t necessarily result from patients with especially severe injuries, public university research found.

Over three years ending in 2014, Florida patients with sprains, mild cuts and other non-life-threatening injuries were “significantly more likely” to be admitted under trauma alerts at HCA hospitals and other for-profit hospitals than at nonprofit hospitals, according to research by University of South Florida economist Etienne Pracht and colleagues. HCA hospitals have admitted emergency department Medicare patients at substantially higher-than-average rates since 2011, suggesting that at other hospitals many would have been sent home, new research by the Service Employees International Union found.

“What’s going on with HCA is the Wall Street model they’re following,” said Pracht, who provided KHN with additional Florida Department of Health data showing soaring trauma cases. “And Wall Street’s not happy unless you’re expanding. They’re driven by the motive to keep the stock price high.”

Lobbying and Campaign Dollars

In Virginia, health care organizations need to go through a lengthy and public application process to add something as basic as a $1 million MRI imaging machine.

But to open or upgrade a trauma center, all that’s needed is the approval of the health commissioner after a confidential qualification procedure. Chippenham did not seek or obtain Level I verification from the American College of Surgeons before getting Level I approval from the state. It is ACS-verified as a Level II center and, Caldwell said, is seeking Level I status with ACS.

Virginia requires an “extensive application” and “in-depth” site reviews by experts before a hospital gains status as a trauma center, Dr. M. Norman Oliver, the commissioner, said in an email. “Chippenham Hospital met the requirements” to become a Level I center, he said.

Nearly 80% of HCA’s Level I and Level II trauma centers have been verified by the American College of Surgeons “and the others currently are pursuing this verification,” said HCA spokesperson Sumerford.

As in other states, HCA invests heavily in Virginia in political influence. Eleven Virginia lobbyists are registered with the state to advocate on HCA’s behalf. One lobbyist spent more than $5,000 from December 2019 through February 2020 treating public officials to reception spreads and meals at posh Richmond restaurants such as L’Opossum and Morton’s the Steakhouse, lobbying records submitted to Virginia’s Conflict of Interest and Ethics Advisory Council show. HCA’s political action committee donated $160,000 to state candidates last year, according to the records.

Like other hospital systems, HCA hires former paramedics for “EMS relations” or “EMS outreach” jobs. HCA’s EMS liaisons are expected to develop a “business plan, driving service line growth,” according to its employment ads.

Chippenham’s decision to start a helicopter-ambulance operation last year to compete with others in transporting trauma patients surprised some public officials. HCA and its contractor had filed paperwork for the operation to be reimbursed by insurers when Richmond City Council members learned about it. Members “were not up to speed on this matter,” councilwoman Kristen Larson told a May 2020 meeting of the Richmond Ambulance Authority, according to the minutes.

Chippenham’s air ambulance partner, private equity-owned Med-Trans, has been the subject of numerous media reports of patients saddled with tens of thousands of dollars in out-of-network surprise bills. It’s not unusual for air ambulances to charge $30,000 or more for transporting a patient from a highway accident or just across town, according to news reports.

Last year, 85% of Med-Trans flights for Virginia patients with health insurance were in-network, said a company spokesperson. But Med-Trans is out of network for Virginia members of Aetna and UnitedHealthcare, two of the state’s biggest carriers, said spokespeople for those companies. Med-Trans is part of Anthem Blue Cross Blue Shield’s network, an Anthem spokesperson said.

HCA runs trauma centers “really well,” said Winchell, who runs the Level I trauma center at NewYork-Presbyterian Weill Cornell Medical Center.

But “there are clearly areas of oversupply” for trauma centers generally, he said.

Instead of letting a drive for profits dictate trauma center expansion, health authorities need “objective and transparent metrics” to guide the designation of trauma centers, Winchell recently wrote in the Journal of the American College of Surgeons.

Free-market advocate “Adam Smith might have been a good economist,” he wrote, “but he would have been a very poor designer of trauma systems.”

KHN data editor Elizabeth Lucas contributed to this report.

KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism about health issues. Together with Policy Analysis and Polling, KHN is one of the three major operating programs at KFF (Kaiser Family Foundation). KFF is an endowed nonprofit organization providing information on health issues to the nation.

AMC inventory extends rally, jumps 20% as theater chain sells new shares

Shares in AMC entertainment rose again on Tuesday after the theater chain sold more than 8 million shares to an investment firm, the latest in a series of capital increases for the troubled company that became Meme Stock.

AMC announced in a securities filing that it raised $ 230.5 million through a sale of shares to Mudrick Capital Management. The theater company announced that it will use the funds for potential acquisitions, upgrading its theaters and deleveraging its balance sheet.

At the close of trading, the shares were up 22.6%.

On Tuesday afternoon, Bloomberg News reported that Mudrick had sold all of his new AMC shares. The stock fell from its highs the day after the report.

AMC’s business was effectively shut down during the pandemic, with cinemas closed for months in most parts of the country and large studios delaying releases during the pandemic. The stock, however, was a favorite of traders on Reddit and has seen wild swings in the past few months.

The shares doubled last week to incredibly high volumes as retail speculative activity, fueled by message board chats, resumed.

The company took advantage of these price jumps by selling additional shares to raise cash. The stock is up more than 1,000% since the start of the year.

“Given that AMC is raising hundreds of millions of dollars, this is an extremely positive result for our shareholders,” said CEO and President Adam Aron in a filing. “We achieved this by issuing just 8.5 million shares, which is less than 1.7% of our issued share capital and only a small fraction of our typical daily trading volume.”

The dramatic price fluctuations could also be due to a short press in the stock caused by traders who wagered against the stock to buy stocks to limit their losses. According to S3 Partners, around 20% of the company’s outstanding shares are being sold short.

AMC has roughly $ 5 billion in debt and has had to defer lease repayments of $ 450 million as its revenues largely dried up during the pandemic. Theaters were closed for months to stop the virus from spreading, and when the company reopened its doors, few consumers were comfortable attending screenings and movie studios withheld new releases.

Now that vaccination rates are rising and the number of coronavirus cases is falling, consumer confidence in returning to theaters has increased. Not to mention the studios are finally releasing new content.

Over the weekend, John Krasinski’s “A Quiet Place Part II,” the sequel to his 2018 blockbuster, raised $ 48.4 million over Friday, Saturday and Sunday, the highest three-day loot of any movie release during the pandemic.

Throughout the four-day Memorial Day weekend, the North American box office made nearly $ 100 million in ticket sales.

While early box office revenues are promising, fundamental elements of the cinema business have changed over the past year, including cinema capacity, joint release dates with streaming services, and the number of days films are shown in theaters.

AMC’s securities filing, which closed Friday with a market capitalization of $ 11.8 billion, also includes a risk warning to investors: “Our market capitalization, as implied from various trading prices, is currently reflecting valuations that are significantly different from those before recent volatility that is well above our market cap immediately prior to the COVID-19 pandemic, and to the extent that those valuations reflect trading dynamics unrelated to our financial performance or prospects, buyers of our Class A common stock could see declines market prices suffer significant losses driven by a return to previous valuations. “

—With reporting from Sarah Whitten from CNBC.

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Chicago-style pizza chain Lou Malnati’s confirms 86th Avenue location

Chicago-style pizza parlor, Lou Malnati, has announced that its second Indianapolis location will open this spring at 2902 W. 86th St. in the Willow Lake West Mall east of Michigan Road.

The Northbrook, Illinois-based chain confirmed to IBJ In March it was planned to open a pizzeria at this address. However, at the time, the company also said it didn’t know when it would open this store as the pandemic brought uncertainties.

The 86th Street location will be 1,600 square feet and will only offer roadside pickup, pickup, and delivery.

Lou Malnati’s opened its first local store on The Bridges development in Carmel at 11435 Spring Mill Road in October.

“We’re excited to be bringing our authentic deep dish pizza to West 86th Street and making it our second home in the Indianapolis area,” said owner Marc Malnati in a written statement.

Malnati also said that a previously announced full-service pizza place in Broad Ripple will open later this year. The restaurant will be located in a 5,145-square-foot building at 6320 Ferguson St., north of the Central Canal.

Malnati is the son of Lou Malnati, who founded the company with his wife Jean and opened his first restaurant in the Chicago suburb of Lincolnwood in 1971.

Today the company has 57 locations in the Chicago area, four in Arizona, three in Wisconsin, one in Schererville, northwest Indiana, and one in Carmel.