PORT ANGELES — The steep financial losses state hospitals experienced in 2022 have slowed somewhat, but health care leaders say they continued to be concerned about a trend of increasing costs and dwindling revenues that can’t continue.
In a recent Washington State Hospital Association (WSHA) financial survey, hospitals reported operating losses of $747 million ($746,666,606) in the first two quarters of 2023 compared to $1.2 billion ($1,161,223,177) during the same period in 2022. Washington hospitals lost a cumulative $2.7 billion in all of 2022.
“The losses remain significant, which is challenging particularly when layered on last year’s losses,” said Eric Lewis, WSHA CFO and former Olympic Medical Center CEO, during a Wednesday online media briefing.
Olympic Medical Center was one of the 85 percent of the hospitals across the state that reported negative net income. It lost $13.9 million from January to July 2023, according to data from the state Department of Health.
OMC Executive Darrel Wolfe, who participated in the briefing, said a primary contributor to its financial challenges was the increasing growth of patients covered by government health care programs.
Almost 85 percent of OMC’s revenue comes from government programs, Wolfe said, which reimburse care at a lower rate than private insurance — which is down to about 14 percent of its total revenue and shrinking.
“Medicare pays approximately 80 cents on the dollar for the services that we provide and Medicaid much less than that,” Wolfe said. “Overall this is an unsustainable equation for us. We find ourselves in a very difficult position going forward.”
This situation is unlikely to improve, Wolfe said, so OMC must seek other revenue opportunities. While financial pressures on the industry have some hospitals taking a close look at consolidation and mergers, Wolfe said that is not the direction OMC is heading.
“We want to stay independent. That is our mission, that is our goal,” Wolfe said. “In the short term, we will keep doing what we’re doing and we’ll continue to serve as we have been and as we’ve pledged to do. But in the long term, I’m very concerned.”
To make up for operating losses, hospitals have been relying on income from their investments and spending down their cash reserves, Lewis said. Hospitals statewide have more than $10 billion in bonds outstanding, Lewis said.
“There’s definitely been multiple downgrades of systems and hospitals in the state,” he said. “I don’t know of hospitals in default, but some hospitals are faced with the challenge of a technical default.”
That would occur if the hospital failed to have 60 days of cash on hand as required by most bondholders.
OMC is currently paying off $60 million in general obligation bonds held by KeyBank. At the end of August, it had just 59 days of cash on hand, but CFO Lorraine Cannon said at the time that KeyBank had notified OMC that it would not tender the bonds.
Washington state hospitals’ ongoing financial strain and losses could mean less access to care for communities, said WSHA President and CEO Cassie Sauer.
“They’ll result in hospitals reducing high-cost or non-profitable services simply so they can keep the doors open,” Sauer said. “We’ve already seen this happen.”
Lewis said a number of hospitals had already stopped providing obstetrics services while others were considering closing.
Reporter Paula Hunt can be reached at firstname.lastname@example.org.