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News / Health / Health Wire

Washington hospitals lost $1.7 billion in 2023

By Santiago Ochoa, Yakima Herald-Republic
Published: April 24, 2024, 3:10pm

YAKIMA — Nearly 85 percent of hospitals in Washington lost money in 2023, state hospital officials said Tuesday.

Astria Toppenish was among those, with the national UnitedHealth cyberattack this spring making things worse, the hospital’s administrator said.

Combined, hospitals in the state saw a net operating loss of $1.7 billion last year, according to a recent survey of 96 percent of the state’s hospitals done by the Washington State Hospital Association. While that number is smaller than 2022’s $2.1 billion cumulative losses, the losses in 2023 mark eight straight quarters of the state’s hospitals have been in the red.

During a meeting to discuss the findings of the survey, Eric Lewis, chief financial officer of the WSHA, broke down the leading causes for the losses last year. He said hospitals did better financially in 2023, but continued losses could become existential.

Lewis said combined operating revenue for hospitals in the state rose by 11 percent in 2023 to just under $33.8 billion due to higher patient volumes. At the same time, employee wages and benefits costs rose by 16 percent compared to 2022, representing $18.6 billion.

Though patient volumes rose, pushing up operating revenues, Lewis said low state Medicaid reimbursements and the rising cost of supplies, utilities and staff, also raised cumulative operating expenses to $35.5 billion compared to 2022’s $32.5 billion, resulting in the $1.7 billion loss.

“There are several main reasons for the recent massive losses by hospitals,” Lewis said. “First, low Medicaid reimbursement. Urban hospitals have not received a rate increase in more than 20 years and some urban hospitals are paid less than 50 percent of their cost to care for patients. In addition, Medicare only pays about 80 percent of the cost of patient care. Together, Medicare and Medicaid are between 50 to 80 percent of most hospital patients.”

Lewis added that a large number of patients who no longer need of acute care but who cannot find rooms in nursing homes or long-term care facilities are taking up beds, costing the hospitals more and preventing others from getting care.

“This situation is extremely costly for hospitals and threatens patient access to inpatient services,” Lewis said.

He also pointed to the time it takes for health insurers to pay for services provided.

Across the state, the average number of days for payment is 63, two weeks longer than what is considered the industry standard of 49 days or less. Lewis said only 17 hospitals in the state in 2023 were being paid within the standard timeframe.

Cassie Sauer, chief executive officer of the WSHA, said some services pre-authorized by insurers are denied after the fact, forcing hospitals to enter into lengthy appeals processes.

“Most of the appeals are upheld on the hospital’s side but the amount of work it takes and the staff time is quite tremendous,” she said.

A final round of Federal Emergency Management Agency funding for COVID-19 resulted in an additional $500.75 million disbursed to Washington hospitals in 2023. That funding helped offset the losses, and kept margins at minus 1 percent. Overall margins in 2022 were minus 9 percent.

Cyberattack

WHSA officials also addressed the financial strain placed on many hospitals in the state following a cyberattack that targeted one of the country’s largest health care companies, UnitedHealth’s Change Healthcare.

The attack occurred on Feb. 21 and disrupted patient care and hospital billing transactions around the country. Everything from pharmacy operation and clinical decision support to patient billing and payment claims were disrupted.

“At first, a lot of the understanding of the issue was an impact on prescribing and transmitting those prescriptions to pharmacies,” said Caitlin Stafford, senior director of government affairs for the WSHA. “But it’s proving to be a much more complicated and widespread issue as we go two months out.”

Stafford said several hospitals in Washington, including Astria Toppenish Hospital, used Change Healthcare as a clearinghouse, or a third party that enables electronic transmissions between health care organizations like hospitals. Change Healthcare checked patient eligibility which helped determine whether patients could submit payment claims, request prior authorization and help hospitals through the billing process.

“Significant delays in providing care and collecting payment for services have been reported by our members and in some cases, 75 to 100 percent of a hospital’s backend operations were impacted,” Stafford said. “This amounts to millions of dollars in delayed funding at a time when most hospitals, as you’ve just heard, have little left in reserves.”

Stafford pointed to one WSHA member hospital system that processed around $12 million worth of claims payments monthly. She said the month after the cyberattack, that figure dropped close to $500,000.

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Effects on the Lower Valley

Cathy Bambrick, hospital administrator for Astria Toppenish Hospital, spoke about the effect the cyberattack had on the Lower Valley hospital.

“It was potentially catastrophic,” Bambrick said. “We did everything we could for 19 days to survive.”

Bambrick said within nine days of the attack, Astria Toppenish had to move to manual billing for services. “That was literally all we could do,” she said.

At the peak of the attack’s effects, Bambrick said the hospital fell behind on $4.5 million worth of collections. The hospital faces a $3.5 million shortfall on cash collections caused by the attack. Bambrick said she’s not sure if Astria staff will ever be able to bring that money in.

“We’re holding our own on cash flows now, but we haven’t recovered,” Bambrick said.

Bambrick also talked about the difficulties of operating a hospital within a particularly impoverished community. She pointed to state charity care statistics that show 51.5 percent of the people living with the hospital’s area of coverage live below 200 percent of the federal poverty level, more than twice the state average of 25.6 percent. She said 15.6 percent of Toppenish’s patients are uninsured, adding to the amount of money the hospital has to pay for care.

“Toppenish Hospital falls through the cracks for enhanced funding models for rural hospital,” Bambrick said. “It is one of four rural hospitals in the state that does not receive cost-based reimbursement and this results in health inequity for the Toppenish community.”

Bambrick said the Toppenish Hospital lost $7.33 million in 2022 and is expected to have lost around $7.97 million in 2023. She said a number of grants designed to help hospitals in tough financial situations have helped stabilize operations at Toppenish and that there is a two-year plan to return to profitability.

Bambrick also touched on how year’s worth of financial struggles and strategic budget cuts led to further degradation of hospital equipment and services. She lamented the closing of the Toppenish Hospital’s Family Maternity Center at the end of 2022 and of the hospital’s MRI service in 2023.

“Bottom line for Toppenish Hospital; because our government payers are not paying the cost of care, we can’t provide equitable services to our community,” Bambrick said. “Astria Toppenish Hospital is fragile and Astria Health is not unique in regards to its financial challenges …

“We can’t take anything else in terms of funding cuts or new rules and regulations that cost money for us to implement, burdensome insurance pre-authorization and payment processes, slowdown in the payments we receive. Any change becomes devastating for us.”

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