WA hospitals warn that services could be affected as their financial picture worsens
The Washington State Hospital Association on Tuesday sounded the alarm again over hospital financial losses totaling billions statewide by the end of 2022.
Cassie Sauer, president and CEO of WSHA, along with various hospital system leaders from across the state, warned in a briefing Tuesday that without further assistance, some sites might not be unable to continue.
“Hospitals in Washington State are facing an unsustainable financial situation,” Sauer said. “Financial losses that our hospitals are experiencing continue to be enormous. Revenues simply are not keeping up with rapidly escalating costs.”
As a result, WSHA is pushing for higher Medicaid reimbursements.
Officials presented the results of WSHA’s 2022 financial survey, with 81 acute-care hospitals in Washington participating, representing 98 percent of available acute-care beds. The survey compared 2022 with 2021 totals.
According to the survey, the hospitals saw a total net income loss of more than $2.7 billion, compared with a $1.2 billion loss in 2021. They reported a net operating income loss of $2.1 billion, compared with $742 million loss in 2021.
Operating income is revenue less any operating expenses, while net income is operating income minus non-operating costs, such as interest and taxes.
“The fact that 2022 is worse is quite alarming,” Sauer noted. “We’re very concerned that access to this specialized care, the highest level of care, and in many cases, the life-saving care is threatened by unsustainable financial losses as hospitals are resorting to extraordinary means to close the gaps in their budgets.”
Higher operating costs were fueled in part by a 120 percent rise in agency traveler costs (temporary labor spending), 6 percent rise in employee wages and benefits, and a 6 percent increase in costs of medication, supplies and other expenses, according to the spreadsheet provided by WSHA.
Eric Lewis, chief financial officer for WSHA, addressed the increased costs of using traveling staff, which has been primarily nurses as hospitals face declining employment ranks amid retirements and people switching to traveling work for higher payments.
“The rates charged by staffing agencies increased by 22 percent per hour, and hospitals use 81 percent more hours of temporary staff,” Lewis said in the presentation. “Temporary staff represented 5.5 percent of hours worked in hospitals in 2022.”
Recruitment for rural hospitals has been a continuing challenge.
Heidi Anderson, Forks Community Hospital CEO, noted that at her site, “We currently have the most traveling staff we’ve ever had. Before the pandemic I can count on one hand the number of travelers we’ve had in 23 years.”
Dori Unterseher, chief nursing officer with Harbor Regional Health in Aberdeen, said at her hospital, “In 2019, we had two travelers here at the end of the year, to in 2021, that was 34. And currently, it’s 42.”
Bill Robertson, chief executive officer for Tacoma-based MultiCare Health System, said that “all of our hospitals in 2022 lost money from a operating margin basis.”
“Our aggregate loss was $286 million,” he added. “Clearly not sustainable over time.”
He said that for now, “We’ve absorbed that in the near term, but it will not last.”
Similar warnings were issued by WSHA last year as federal pandemic aid became a thing of the past while labor costs and other expenses rose.
This go-around, Lewis and others defined the mounting losses as “a structural problem for all hospitals with expenses significantly higher than Medicare and Medicaid reimbursement, and expense is growing faster than reimbursement.”
“The reasons for these massive losses are many, including low Medicaid reimbursement as urban hospitals have not received a rate increase in 20 years, and some urban hospitals are paid less than 50 percent of costs,” he said.
“Hospitals are subsidizing the state’s Medicaid program. High inflation and labor shortages resulted in labor, drug and supply costs rising faster than payment rates,” he added. “More complex patients whose care costs are much higher than reimbursement especially from government payers, such as Medicare and Medicaid, who have fixed reimbursement models.”
Lewis noted it’s also a national problem, and hospitals expecting “2023 to also be a financially challenging year as expenses are expected to continue to rise faster than reimbursement.”
Robertson noted that with Multicare serving as a large provider of Medicaid beneficiaries, the lack of any reimbursement increases is adding to the health system’s financial struggles.
“The fact that Medicaid has not had a rate increase since 20 years is dramatically impacting on our organization’s ability to be financially stable to meet our community’s needs,” he said.
Sauer said that with the continuing financial strains, “We’re already seeing loss of services around our state.”
In one example, Unteseher noted a surgical unit at her site has been shuttered since August 2020.
“I think we were, if not the first, one of the first hospitals in the state to actually close a service line down,” she said. “The effect that that has had on us is that it has led to a sicker population that is coming into our emergency department.”
WSHA is seeking new legislation from state lawmakers to help bring relief in the form of improved Medicaid reimbursement, bringing it up to Medicare rates, said Chelene Whiteaker, senior vice president of Government Affairs for WSHA.
“The increase in dollars would follow Medicaid patients, meaning the payment increases go to hospitals when Medicaid patients receive these services. So this is the solution WSHA is bringing to the table,” she said.
The improved payments have a ways to go, with first getting through the Legislature, she noted.
If approved, “we would then go seek federal approval from the Centers for Medicare and Medicaid Services. And if we’re successful, Medicaid payments would be increased about a year from now,” Whiteaker said.
Even if the higher payments win state and federal approval, there’s an anticipated financial gap.
“This will not make up for the gap that we are seeing between hospital costs and revenue. Hospital losses were $2.1 billion from operations, and the Medicaid rate increases would be about a billion dollars a year,” she said.
“So that leaves about a billion dollars in terms of losses that this new program would not cover.”
Robertson noted the time is now for action to help hospitals struggling to survive.
“We can’t continue to do it at a loss, because ultimately, we’ll cease to exist if these losses continue.”