Washington hospitals beginning to cut services as losses mount, margins plummet

Washington hospitals' challenging financial situation continues to worsen with losses on track to far exceed $3 billion for the year and showing no signs of letting up in early 2023.

For the nine months ended Sept. 30, losses for hospitals in the state totaled $2.57 billion, with almost $1.66 billion in losses from operations, which represents a -7 percent margin, the Washington State Hospital Association outlined in a Dec. 19 news release. For the same period in 2021, net operating losses for Washington hospitals were $285 million.

"These ongoing, unsustainable losses are beginning to impact patient access to services," WSHA CEO Cassie Sauer said. "Hospitals are beginning to cut some services to preserve vital lifesaving care. If this troubling trend continues, some hospitals will need to seek partners to remain open or consider closing their doors if no options are available."

These losses mean many hospitals are dipping into reserves that would typically be used to invest in new technology, service lines, capital upgrades and paying down long-term debt, according to the hospital association.

The main drivers of the losses include low Medicaid reimbursement rates, inflation that outpaces payment rates, increasing staffing costs, complex patients whose costs are higher than reimbursements and a rising number of patients no longer in need of hospital care but unable to be discharged and discontinued federal pandemic funding.

"If current trends continue, about half of Washington's hospitals will be out of money by the end of 2023," WSHA CFO Eric Lewis said. "Hospitals are considering bed and service closures as a way to preserve resources for the most critical services."

To offset losses in 2023, the hospital group is calling on lawmakers to initiate a number of changes, including increased Medicaid payment rates, more funding for complex patients, improvements to the long-term care system to help hospitals discharge patients who no longer need inpatient services, and funding of new behavioral health 23-hour crisis centers.

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