Financial losses are impacting patient care at Washington hospitals


Shane Ersland


Washington hospitals are struggling to address financial challenges that are impacting patient care.


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Washington State Hospital Association (WSHA) staff released the results of its third quarter hospital financial survey during a media briefing on Tuesday. WSHA CFO Eric Lewis said total operating expenses for hospitals increased by 10% in the first nine months of 2022 compared to 2021, while revenues increased by only 4%.

“These higher costs were driven by significantly increasing costs for staff, energy, supplies, and drugs,” Lewis said.

Hospital employee compensation increased by 8% during the first nine months of 2022 compared to 2021, while the number of hospital employees increased by 1.5%, Lewis said. Temporary labor spending increased by 199%. 

“Many staff were out sick due to COVID, and there were more acutely ill patients in hospitals,” Lewis said. “Hospitals used 90% more hours for temporary staff.”

Hospitals saw a net operating loss of $1.66 billion during the first nine months of 2022, which represents a -7% operating margin, Lewis said. In 2021, their net operating loss was -1%.

WSHA CEO Cassie Sauer said financial losses at hospitals are impacting care. 

“Access to specialized care is threatened by financial losses,” Sauer said. “Some hospitals are reducing services. Without action, we could actually see hospital closures. This is at a time when demand for healthcare services in our state is exceptionally high. We’re experiencing so many patients who had delayed care during the pandemic who are sicker and need more complex care.”

Hospital services are also in high demand due to the spread of respiratory viruses and mental health concerns, Sauer said. But hospitals are struggling to provide services as they face financial difficulties. Low Medicaid reimbursement rates are contributing to the problem. 

“Urban hospitals in our state have not received a rate increase in Medicaid in more than 20 years,” Sauer said. “This is at a time when the state has massively expanded Medicaid to cover hundreds of thousands more people. Hospitals are essentially subsidizing the state’s Medicaid program. Some urban hospitals are paid less than 50% of the cost of care for Medicaid patients, while they see their number of Medicaid patients go up.”

Susan Stacey, Chief Executive for Providence Inland Northwest Washington, said the hospital’s expenses have increased by nearly 8% during the first nine months of 2022, while revenues increased by a little over 1%. That resulted in a $60 million deterioration in operating losses, which has led to a hold on Providence’s plans to ramp up clinical services. 

“We have plans to grow physical clinic space so we can have primary care offices and have more primary care clinics in our community,” Stacey said. “But at this point, with the capital freezes, we’re unable to do that right now. And that ultimately creates a gap in our community of delaying care.”

Chelene Whiteaker, WSHA Senior Vice President of Government Affairs, said WSHA plans to ask the legislature to significantly increase Medicaid payments to hospitals during the upcoming legislative session, which starts in January.

“WSHA is going to have a proposal for the legislature that will maximize federal funding and bring hospital Medicaid payments to at least Medicare levels,” Whiteaker said. “Our proposal would bring hospital payments to about 76% of the cost of providing care. This still leaves a significant Medicaid shortfallthe difference between payments and the cost of providing carebut it would significantly close the gap we’re seeing.”

Hospitals are also experiencing problems in caring for patients who are ready for discharge but are unable to secure placement in a nursing home or other post-acute care facility. At least ten to 20% of the state’s hospital beds are filled with patients who no longer have a medical need to be in the hospital at any given time, Whiteaker said.

“So we’re asking the legislature to look at solutions in this area, including additional funding to place complex patients that have traumatic brain injury or people with developmental disabilities,” Whiteaker said.

Dr. Joshua Jones, Chief Physician Officer at Olympic Medical Center in Port Angeles, said finding alternative patient placement is a challenging issue at his hospital, which has 67 beds.

“At any one point in time, maybe ten to 15% of those are taken up by folks who would be best served at a skilled nursing facility or some other lower level of care [facility] than a hospital,” Jones said. “Our biggest limiter to being able to expand services is our ability to staff.”

Staffing shortages also present a challenge for Brian Gibbons, CEO of Astria Health in Sunnyside.

“We really struggle to find nurses in these small community markets,” Gibbons said. “And many of our nurses have moved on to become travel nurses. They get compensated three times the rate. Soon you’re replacing nurses who have left to become travel nurses with travel nurses.”

The shortage of staff led to Astria’s decision to destaff five of its 15 medical-surgical beds earlier this year. The hospital also had to destaff three of its seven ICU beds, Gibbons said. 

“Suddenly, my 25-bed hospital was a 14-bed hospital,” Gibbons said.

Astria was eventually able to restaff the five medical-surgical beds in Sunnyside by staffing them with LPNs (instead of RNs), but the ICU beds are still closed. 

“In order for us to use those three ICU beds, we will need nine ICU nurses,” Gibbons said. “I just don’t see that happening any time soon. So our ICU capacity is at half in Sunnyside.”