The DCH Health System, which operates three hospitals in Tuscaloosa, Northport and Fayette, may lose $60 million this fiscal year as the costs of combatting the COVID-19 pandemic continue to climb.

The news was shared in an internal email obtained by the Tuscaloosa Thread which was sent by DCH Chief Medical Officer Robin Wilson to the System's medical staff Thursday.

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"In fiscal year 21 (ended Sept. 2021), DCH experienced more than $70 million in extra costs related to the pandemic, with no substantial increase in reimbursement," Wilson wrote to staff members.

Spikes in expenses reportedly included a $35 million increase in spending on contract labor -- hiring non-full-time help like travel nurses and doctors. Those costs skyrocketed amid fierce competition among regional hospitals vying to remain adequately staffed during the worst of the pandemic and had the additional effect of drastically reducing DCH's ability to recruit and retain its own full-time employees.

Wilson also said the cost of medical supplies rose around 30 percent -- an extra $24 million last fiscal year. Salary expenses climbed an additional $10 million, and the cost of medicine and other pharmaceutical supplies also jumped 19 percent last year, another $3 million in expenses.

In the meantime, federal and state funding to help hospitals fight the virus have virtually disappeared, leaving DCH with tens of millions of dollars in new expenses with little to no new revenue to offset that spending.

One silver lining, Wilson said, is that February was the first month this fiscal year in which the DCH System met its budget, but losses have already exceeded $20 million so far this fiscal year.

"If the current trend continues, we could end the year at or near a $60 million loss versus a budgeted loss of $23 million," Wilson wrote in his message to staff. "Because of this projected outlook, we currently cannot afford to provide market adjustments and merit increases to staff, including the senior leadership team, in the traditional form."

In addition to announcing the freeze on raises and cost of living adjustments, Wilson asked the System's medical staff to make any suggestions they see fit about how to decrease expenses and increase revenue at the hospitals.

Andy North, DCH's Vice President of Marketing and Communications, confirmed the authenticity of the leaked email in a separate message to the Thread and said the System is brainstorming ideas to lower expenses and generate new revenue.

"Like most hospitals in the state and across the country, DCH has been struggling with the financial fallout created by the COVID-19 pandemic," North wrote. "In fiscal year 21 (ended Sept. 21), DCH experienced more than $70 million in extra costs (both supply chain and staffing cost increases) related to the pandemic, with no substantial increase in reimbursement. Many of those increases have continued into the current fiscal year, but almost all of the state and federal pandemic assistance has not."

"As stated in the memo, several strategic initiatives to increase revenue have already been underway including reducing expenses, more closely managing staff hours based on need and taking a very conservative approach to capital spending," North continued. "Those efforts have helped slow the loss to some extent and the memo was provided to keep the medical staff informed as to the current situation, inform them of ongoing actions to manage it and seek collaborative input."

For updates on the hospital system's financial issues as they develop, stay connected to the Tuscaloosa Thread.

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