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News / Health / Health Wire

Washington hospitals lost $2 billion in 2022. A plan to up Medicaid rates could help

By Elise Takahama, The Seattle Times
Published: March 23, 2023, 7:43am

Washington hospitals lost more than $2 billion last year, but this week reached an early agreement with state lawmakers that would get them more federal dollars and help health care systems out of their growing financial hole.

In the final quarter of last year, hospitals lost another $500 million — continuing a trend of massive financial losses that has worried health care leaders for months. This week, Cassie Sauer, president and CEO of the Washington State Hospital Association, said in a news conference that the results are “clear and incredibly concerning.” A recent legislative agreement, however, could help close some short-term gaps in Medicaid reimbursements through a proposed directed payment program, known as a safety net assessment program in Washington.

“The financial losses that our hospitals are experiencing continue to be enormous,” Sauer said. “Revenues simply are not keeping up with rapidly escalating costs. It’s most concerning as these large losses are putting patient care at risk in many communities across the state.”

Of the 81 acute-care hospitals surveyed — representing 98% of the state’s beds — 69 lost money, said Eric Lewis, the association’s chief financial officer. Twelve made a profit, though 11 were rural, critical-access hospitals that received extra COVID-19 relief funding in December 2021.

Hospitals saw a 120% increase in costs for travel nurses, jumping from about $860 million in 2021 to $1.8 billion in 2022, according to the association survey results. They also reported a rise in costs for permanent employees, and for supplies, drugs and other expenses.

Lewis attributed the bulk of the losses to factors that have plagued the hospital association all year — including low Medicaid reimbursement rates for larger, urban hospitals; high inflation costs; labor shortages; and lengthy patient stays due to more complicated care.

“Expect 2023 to also be a financially challenging year as expenses are expected to continue to rise faster than reimbursement,” Lewis said.

The hospital association is hoping for some relief from the federal government through its proposed directed payment program, which many other states already have. On Tuesday, state lawmakers reached an agreement that moves the directed payment proposal forward.

“When hospitals are not financially viable and over time sustain heavy losses, you must either increase revenue or reduce health care services,” said Chelene Whiteaker, the hospital association’s vice president of government affairs. “Reducing health care services is an option nobody wants on the table. So that leaves increasing revenues.”

Washington has long run a much smaller version of this program, but a couple years ago the federal government told state leaders it would need to be fully phased out by 2028, citing policy changes. For the past two years, the hospital association has been trying to find a new plan that would not only continue the program’s efforts to ensure Medicaid access but expand them.

“We were kind of forced to look at losing those federal funds for Medicaid or come up with a new program,” Whiteaker said.

According to Whiteaker, many Washington hospitals get 60% to 80% of their funding from government programs like Medicare and Medicaid, which haven’t kept up with the rising costs of inflation, wages and supplies.

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Hospitals need at least $1 billion annually in increased Medicaid payments to help sustain services, Whiteaker said. That large of an increase in payments would be “challenging for our state Legislature,” she said, which is why the directed payment proposal wouldn’t use money from the state general fund.

Instead of requesting state general dollars, the program would tax Washington hospitals, then get matching funds from the federal government and send that back to state hospitals that care for Medicaid patients. For every dollar the hospitals are taxed or assessed, the federal government would return $3, Whiteaker said.

The proposal would bring the state’s Medicaid rates up to nationwide Medicare rates, and rake in an additional $1 billion from federal reimbursements starting sometime next year, she said.

The bill that provides more details on the agreement is expected to be introduced to the Legislature in the next couple of days.

If the state Legislature approves the program, the hospital association must then seek federal approval from the Centers for Medicare and Medicaid Services through the state’s Health Care Authority.

“Our state has been very generous in expanding coverage to people on Medicaid, but has not matched that with [hospital reimbursement rates],” Sauer said. “This is a real investment in making sure that that’s the case.”