$4.2 million Paycheck Protection loan provides relief for Lincoln Health System

Rural community hospitals across America were struggling to keep their doors open prior to COVID-19 and the pandemic has placed an even more significant strain on their viability. However, for Lincoln Health System, the impact of COVID-19 has been lightened through the CARES ACT Paycheck Protection Program.

With the blessings of the Lincoln County Commission, Lincoln Health System has applied for and received a $4,280,000 loan funded by the Paycheck Protection Program, allowing the recall of 16 furloughed full-time employees and the reinstatement of hours cut for other personnel.

According to interim hospital CEO Russ Spray, “Volume and utilization of services of hospitals has plummeted during the COVID-19 pandemic.” For LHS, that meant a reduction of approximately $2 million in gross charges each month during the COVID-19 pandemic.

Katie Stovall, LHS Director of Business Development said the drop in revenue was due to a combination of a reduction in services offered by the hospital such as elective surgeries, the state-wide mandated closure of facilities offering some of the services of the Patrick Rehab and Wellness Center such as the pool and gym along with people’s fears of coming into the hospital. The least affected of the three arms of Lincoln Health System was the 168 bed Donaldson Care Center.

Prior to COVID-19, the hospital averaged 3,000 outpatient visits per month but declined to around 1,800 since the pandemic. Emergency room admissions dropped form an average daily census of 39 to 21. Stovall said those figures are already improving.

A provision of the Coronavirus Aid, Relief and Economic Security Act (CARES ACT), the Paycheck Protection Program, administered by the Small Business Administration, provides for forgiveness of up to the full principal amount of the loan. The intent is to provide economic relief for businesses adversely affected by COVID-19 and allow workers to return to their jobs.

While 16 employees were furloughed, the reduction in the workforce for Lincoln Health System actually was equivalent to the loss of 40 full-time employees based not only on furloughed staff but also on reduction in hours for other staff. The LHS payroll decreased from $1,610,990 for the equivalent hours of 364 employees to $1,420,265 equating to 324 full-time employee hours.

Spray said that immediately upon the closure of the loan, all furloughed staff were called back and hours were restored to those who had their hours reduced. Spray added that almost all the staff had opted to return with only a few waiting until they felt the risk of COVID-19 was reduced - mainly those with existing health problems. In order to have the loan forgiven, employees must be paid during an eight week stretch of the program. At the end of that eight week period, documentation will be submitted to the Small Business Administration and the amount of “forgiveness” will be determined. Spray said that he anticipates that the loan will be 100 percent converted into a grant.

“The loan forgiveness component is what made it appealing to us and made it a good fit, allowing us to the ability to recall works,” said Stovall.

The loan closed May 6 with $1,057,300 designated for Donaldson Care Center and $3,222,600 set aside for the hospital and Patrick Wellness Rehab. The loan was processed through First Bank in Fayetteville.