WA hospitals still face record financial losses; more service cuts expected

Washington hospitals faced another round of record financial losses in the second quarter of 2022 as health care systems continue to recover from the pandemic, prompting some service cuts in parts of the state.

In the Washington State Hospital Association’s second financial survey of state hospitals this year, results were “clear and incredibly concerning,” association CEO Cassie Sauer said during a news briefing Tuesday.

“Hospitals in Washington state continue to face an unsustainable financial situation,” Sauer said. “The financial losses our hospitals are facing continue to be enormous and revenues simply are not keeping up with rapidly escalating costs. Our biggest concern here is that it’s putting patient care at risk in many communities.”

Results of the association’s first survey, released in July, showed Washington hospitals suffered a net loss of about $929 million in the first three months of 2022. That number has increased to nearly $1.8 billion for the first six months of the year, meaning hospitals lost another $820 million in the second quarter of 2022.

“Part of what made 2020 and 2021 survivable were federal relief payments to hospitals,” said Eric Lewis, the association’s chief financial officer. “These federal relief payments have ended and urban hospitals are out of funding.”

Hospitals point to a host of problems draining them financially, many that are tough to solve in the short-term. Part of it is workforce shortages coupled with the high cost of travel nurses needed to fill shifts, health care leaders say. Part is low insurance reimbursement rates paired with patients who are unable to be discharged and stay at hospitals even after they no longer need costly hospital care. And part is inflation, making medications and supplies more expensive.

Compared to the first half of 2021, hospitals spent 11% more on supplies, drugs and labor, including 9% more on employee wages and a staggering 235% more on travel nurses, according to survey results.

In addition, 74 of the 85 hospitals that responded to the survey reported they were spending more than they were taking in — and more than 50% of those hospitals could be out of cash by the end of 2023 if losses continue at the same pace, Lewis added.

“This situation is extremely costly to hospitals and threatens patient access to needed inpatient services,” Lewis said. “Large losses are expected to last [the rest of] 2022, and 2023 is looking worse as expenses are expected to continue to rise faster than reimbursement.”

A handful of individual hospital systems reported facing similar challenges to one another during the Tuesday briefing.

Two UW Medicine hospitals — UW Medical Center in Seattle and Valley Medical Center in Renton — budgeted a loss for 2023, while Harborview Medical Center, the only level 1 trauma center in the state, was predicted to break even, said health system CFO Jacqueline Cabe .

However, “it looks highly unlikely that we’ll even achieve that level of performance,” Cabe said.

For example, UW Medical Center has reported a 14% loss to date, although Cabe did not share figures for the entire health system.

“Our hospitals may not be able to sustain operations in the event of large and financially destabilizing events, such as what we’ve currently been experiencing within the pandemic,” she said.

MultiCare, based in Tacoma, has experienced more than a $250 million loss so far this year, including a $22 million loss in August.

“Things are not getting materially better,” said Alex Jackson, MultiCare’s chief executive and senior vice president of the system’s inland Northwest region.

Overlake Medical Center in Bellevue and Cascade Medical Center in Leavenworth are also losing money every month, according to hospital leaders.

Overlake has closed one of its urgent care centers and medical teams regularly look at their surgery schedule to see what they can postpone to make room for other patients.

A number of services have also been scaled back on Whidbey Island, and Providence Regional Medical Center Everett has temporarily stopped accepting patients to its inpatient pediatrics unit, Sauer said.

“It’s definitely a result of volume staying pretty flat, but our costs are rising pretty astronomically, particularly around labor,” said Cascade CEO Diane Blake, adding that labor makes up about 66% of total expenses.

The financial challenge of travel nurses has caught some federal attention, Sauer said. One recently introduced bill would direct the US Government Accountability Office to study the travel nurse businesses and payment practices, and analyze the impact of those practices on potential workforce shortages.

In addition, “there’s a pretty strong concern in Congress that these agencies really took advantage of the crisis and engaged in price gouging across the country,” Sauer said.

A state investigation is possible, although Sauer noted Washington health leaders have been reluctant to be the first to act against travel agencies and their high rates, partially out of concerns the Northwest could lose travel nurses at a time the region still desperately needs extra staffers.

“The financial health of hospitals is what enables hospitals to deliver timely and quality patient care throughout the state,” she said. “That is something that is really in jeopardy now and we are pleading for help from the state. And we’re right on the precipice of seeing pretty significant cuts.”

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