Washington state hospitals facing ‘unsustainable’ financial losses, in danger of cutting services

SEATTLE – Washington’s hospitals are facing massive financial losses after the first quarter of 2022, placing the state’s health care system in the most precarious situation many hospital leaders say they’ve seen in their lives.

According to a recent survey conducted by the Washington State Hospital Association, hospitals across the state suffered a net loss of about $929 million in the first three months of 2022. While operating revenue increased by 5%, operating expenses increased by 11%, which – combined with nonoperating investment losses – resulted in a total loss of about 13%.

“The financial challenges revealed by the survey are really quite grave,” WSHA CEO Cassier Sauer said at a news briefing Thursday. “Hospitals’ ability to sustain all the health care services they provide in the face of a dire financial situation is in question.”

The hospitals that responded to the survey represent about 97% of all inpatient, acute beds statewide. All 52 urban hospitals and health systems, as well as 18 of 34 independent, rural hospitals, reported losses.

If the trend continues, Sauer said, hospitals will likely have to cut certain services or close inpatient units. The biggest concern, she added, is that some health care systems could be forced to close or file for bankruptcy if the financial losses persist.

“This level of loss is unsustainable,” said Eric Lewis, WSHA’s chief financial officer. “It is like nothing I’ve ever seen in my career.”

Lewis attributed the recent losses to several factors, including chronically low Medicaid reimbursement, high inflation and labor shortages – which have resulted in labor, drug and supply costs increasing faster than payment rates – and an increasing number of high-cost patients staying in hospitals for long periods of time, instead of being discharged to long-term care facilities to complete their recovery.

In addition, while many large urban hospitals were able to use federal relief funding to cover financial losses at the beginning of last year, those dollars have run out, he said.

“It’s going to be hard to fix,” Lewis said. “Large losses continued in the second quarter and significant losses are expected during the last six months of 2022.”

At Confluence Health in central Washington, for example, reports show the hospital system lost nearly $5 million in the first quarter of 2022, said chief financial officer Tom Legel.

Expenses are “significantly” higher than they were last year at Providence hospitals in Spokane and Stevens counties, too, said CEO Susan Stacey. Now, Providence Inland Northwest is spending between $4 and $5 million a month more than what the system has spent in the past.

“There’s simply not enough people working in health care right now,” Stacey said. “Nor is there a long line of people waiting to enter the field.”

While many hospitals throughout the state have utilized contract health care staffers – often known as travelers – to fill scheduling holes for a limited amount of time throughout the pandemic, their rates are much more expensive than full-time, long-term staffers.

“As we work to continue to reduce the temporary staff … their costs have been impossible to cover,” Stacey said. “We risk burning out our remaining caregivers who are also exhausted both mentally and physically.”

It’s not just travelers, she added. Hospitals’ own staffers are also continuing to pick up overtime and extra shifts, which also adds to higher labor costs.

If the significant financial losses persist, hospitals will have a harder time increasing wages, recruiting and retaining staff, paying off existing debts (often for construction or new equipment purchases), keeping up with new health care technology, and maintaining other community health services, Sauer said.

In rural parts of the state, obstetric services are at the greatest risk of being reduced or cut first, according to leaders from Coulee Medical Center, Lake Chelan Health and Forks Community Hospital.

While hospitals are hoping for some short-term solutions – like getting the state to help move patients from acute care into more appropriate settings – longer-term fixes will require support from the Legislature, said Chelene Whitaker, WSHA’s senior vice president for government affairs.

During the 2023 legislative session, Whitaker said, WSHA’s priorities will include increasing Medicaid reimbursement rates to hospitals, which haven’t increased in two decades, and expanding behavioral health services, staffers and facilities.

“It’s important that we openly talk about this issue,” Stacey said. “Our caregivers and our patients need to know our hospitals are suffering financially. We want people to come to the hospital when they’re sick, but right now that is being threatened.”