Washington hospitals face dire financial challenges


Shane Ersland


Hospitals throughout Washington state face financial insecurity as several factors, including low Medicaid reimbursement and labor shortages, are contributing to their economic challenges.


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Washington State Hospital Association (WSHA) staff joined representatives from state health care facilities to provide an economic update on the industry Thursday. WSHA CEO Cassie Sauer said the association recently conducted a survey of all member hospitals to better understand the challenges they face. 

“The financial challenges revealed by the survey are really quite grave,” Sauer said. “Some beds and services are being pared back and that’s contributing to the acute care hospital capacity crisis in multiple areas of the state. What we’re concerned about is that ongoing large financial losses will result in less access to health care for patients as some hospitals will be forced to close inpatient units or limit availability of certain services.”

Another concern is that the continuation of the growing trend of large financial losses could threaten some hospitals with bankruptcy or closure, Sauer said.

“The communities where hospitals are most at risk, in many cases, they’re the only hospital in that community,” Sauer said. “So losing the hospital would be a really big deal.”

WSHA CFO Eric Lewis said WSHA surveyed the financial performance of members during the first quarter of 2022 compared to the first quarter of 2021. Hospitals representing 97% of all inpatient acute care beds responded. Their total operating revenues increased by 5%, while total operating expenses increased by 11%, contributing to a net loss.

“Higher costs were driven by a number of factors, including increased workforce, supply, and drug expenses,” Lewis said. “These operating losses combined with significant investment losses resulted in a net loss for hospitals across Washington of a negative $929 million in the first quarter of 2022. This is a negative 13% net loss. It is like nothing I’ve seen in my career and hospital leaders around the state are very concerned about this.”

All of the state’s 52 urban hospitals and health systems reported negative margins, while 18 of 34 independent rural hospitals had negative margins, Lewis said. He said the reasons for these losses included: 

  • Low Medicaid reimbursement
  • High inflation and labor shortages
  • Temporary labor spending 
  • More complex patients whose cost of care is higher than reimbursement
  • A large number of patients ready for discharge who are not able to secure placement in other health care facilities like nursing homes

Mary Shepler, Chief Nursing Officer at Evergreen Health in Kirkland, said Evergreen currently has over 45 patients who no longer require its services and need some type of long-term acute care. They are occupying beds at a cost of almost $1.3 million per week, she said.

“When we are this full with patients who don’t need our beds, it uses more of our nursing resources that could be deployed elsewhere,” Shepler said.

Susan Stacey, Chief Executive of Providence Inland Northwest Washington, said one of  Providence’s biggest financial challenges is labor. It is spending between $4-5 million more per month than it has spent in years past in Spokane and Stevens County. A significant reason for that is money spent on traveler contracts and locum positions, she said.

“As we work to reduce the temporary staff like travelers and locum positions, their costs have been impossible to cover,” Stacey said. “We risk burning out our remaining caregivers who are also exhausted, both mentally and physically, from a pandemic we still face today. And we’re not just spending money on travelers. Our own staff are picking up overtime, extra shifts, and we’re helping to compensate that as well.”

Travelers represented about 5% of hours worked in the first quarter of 2022, Lewis said. Stacey said there is no quick and easy solution to the problem. 

“We need help from our legislators and we need help from our community,” Stacey said. “There’s simply not enough people working in health care right now, nor is there a long line of people waiting to enter the field.”

Tom Legel, CFO of Confluence Health in Wenatchee, said behavioral health patients represent a significant challenge for Confluence.

“They’re hard to care for, they’re at times violent, and they’ve hurt our employees where they’ve had to take time off from work to heal from those outbursts,” Legel said.

Another challenge hospitals face is that Medicaid reimbursement rates have not increased in over 20 years, WSHA Senior Vice President for Government Affairs Chelene Whiteaker, said. 

“During the 2023 session, our priorities will include an increase to Medicaid rates to hospitals,” Whiteaker said. “We are continuing to explore options and solutions here, but hospitals have not had a rate increase in 20 years. That is unsustainable here and we will need the legislature’s help.”