Washington hospitals are asking their legislature to increase payments and cut red tape in order to offset statewide financial struggles and service closures.
According to Washington State Hospital Association (WSHA) survey data released Monday, hospitals and health systems in the state are down $2.57 billion during the first nine months of 2022.
Nearly $1.66 billion of that total represents net operating losses, the group said, translating to a collective -7% operating margin. For comparison, net operating losses across the same period of 2021 came to $285.46 million for the state’s hospitals.
“If current trends continue, about half of Washington’s hospitals will be out of money by the end of 2023,” WSHA Chief Financial Officer Eric Lewis said in a Monday release. “Hospitals are considering bed and service closures as a way to preserve resources for the most critical services.”
The survey—which includes all Washington health systems and about 98% of the state’s hospital beds—showed a 4% year-over-year increase in total operating revenues but a 10% jump in total operating expenses. This included an 8% rise in employed wages and benefit costs as well as a 199% spike in agency travel costs.
Net nonoperating revenues, which typically are dominated by investments, also turned around from a $1.14 billion gain during 2021’s first nine months to a $1.19 billion loss in 2022, according to the industry group.
Hospital and health system leaders told reporters that the numbers reflect a dire reality for Washington hospitals and their ability to continue providing care.
“This is really the worst I’ve seen the state of the healthcare system in 35 years,” Susan Stacey, chief executive of Providence’s Inland Northwest WA service area, said during a virtual press panel.
Earlier this year, Washington hospitals warned that discharge challenges tied to workforce shortages at their facilities and post-acute settings alike were pushing facilities past capacity. Those scenarios, now occurring across the rest of the country, remain commonplace across the state, hospital executives said.
“Our hospital has 67 beds. At any one point in time, maybe 10% to 15% of those are taken up by folks who really would be best served at a skilled nursing facility or some other lower level of care than an acute care hospital,” said Joshua Jones, M.D., chief physician officer at Olympic Medical Center, during the press panel.
“We’re having folks who need to be transferred to a higher level of care boarded in our emergency department at rates we’ve never seen before, sometimes seven patients, sometimes 12 patients in a 20-bed emergency department waiting to transfer. Because of our short staffing [and] short staffing that’s going on throughout the state, sometimes we have to close emergency department beds down and those folks are required to wait or seek care elsewhere,” he said.
The impact of tied-up beds is being amplified by cutbacks in staffed beds or even entire service lines.
Brian Gibbons, president and CEO at Astria Health, a two-hospital nonprofit system in eastern Washington, said many of the nurses at his small hospital left for higher-paying travel nurse positions. The organization plugged the staffing gaps earlier in the year with pricey contract labor that it couldn’t afford to maintain in the long run.
“In an effort to reduce costs, especially on contract labor this summer, we started thinking about it and realized the only thing we had any control over in this process was the demand for nurses, and that means capacity,” he said. “Marginally, we were paying more to provide the service for our patients than we were being reimbursed for the provision of those services … so what we had to do was to de-staff five of 15 med-surg beds, and this is a 25-bed critical access hospital. We had to de-staff three out of seven ICU beds.
“While that doesn’t sound like very much, the plan was designed to reduce our contract labor usage by 30% [and] it reduced our capacity by 30%. Suddenly my 25-bed hospital was a 14-bed hospital and that becomes very, very challenging,” he said.
Alongside staffing and capacity challenges, Providence’s Stacey said the losses have forced hospitals to hit the brakes on forward-looking investments. These include expanding primary care and preventive health programs as well as purchases of up-to-date technology used in patient care.
“At Sacred Heart, we were very much along the path to modernize our operating rooms to become more efficient and our procedures to run efficiently and have the most up-to-date technology,” she said. “All of those projects have been paused due to the financial losses. We cannot make those investments right now. … Ultimately, that impacts our community and our ability to provide the best care we can.”
To avoid closures, consolidation or other major shake-ups to Washington’s provider landscape, WSHA called for the state’s legislature to introduce measures that would increase reimbursement and introduce capacity across hospitals and other post-acute care settings. Specifically, the group called for:
- Increasing Medicaid payment rates “to at least Medicare levels”
- Increasing long-term care payments to help attract and retain staff
- Expediting discharges of Medicaid patients in need of guardianship to long-term care settings
- Funding behavioral health crisis receiving centers
- Maintaining hospital staffing flexibilities
Washington lawmakers’ next legislative session begins in January.
“This problem is in the billions statewide,” WSHA CEO Cassie Sauer said. “It’s going to take effort and commitment to fix, and it requires both short- and long-term solutions. We expect the losses to continue during the last three months of 2022 and we’re concerned that 2023, without action, will compound the problem as expenses are expected to continue to rise without action.”
Washington hospitals’ petitions echo those of the Texas Hospital Association, which warned earlier this month of negative margins affecting nearly half of its hospitals and closure risks affecting more than a quarter of its rural members. Mississippi’s state health officer also warned in late November that half of his state’s rural hospitals were at risk of closure.
On a national level, industry data from Kaufman Hall showed at least 10 straight months of operational losses across 2022 due to rising expenses and stymied revenue growth. Trade groups such as the American Hospital Association are making the case to federal lawmakers for additional temporary relief.