Washington state hospitals warn budget cuts could lead to reduced services

For most Washington state hospitals, the recovery from the COVID-19 pandemic has been slow, and many are still running in the red.

Now, just as hospitals have made some progress, they say state budget proposals could undo those gains and put some providers in severe financial distress. Washington state hospital leaders say state lawmakers’ proposals could force hospitals to reduce services, and some rural communities would lose some vital services.

Hospitals in Washington state, and across the nation, are bracing for the prospect of cuts in Medicaid, which would compound their financial difficulties.

The Washington State Hospital Association and leaders of health systems outlined many of those concerns in a webinar Wednesday. Cassie Sauer, president & CEO of the Washington State Hospital Association, said that due to the impact of state budget proposals “things are about to go bad again.”

Hospitals could be looking at a reduction in $280 million to $330 million in state aid annually under proposals considered by lawmakers, Sauer said. Washington lawmakers are developing a spending plan, and Washington Gov. Bob Ferguson has proposed $4 billion in budget cuts as the state faces a deficit.

“We do appreciate that the state has a significant budget gap to fill, but this level of cut will hurt people, and hamper their access to local healthcare services,” Sauer said.

With the added dilemma of potential cuts in Medicaid, hospitals are facing mounting cost pressures, and Washington state residents will find it more difficult to get the care they need.

“What we think will happen, what people will expect is likely longer wait times in the emergency department, longer wait times for primary care appointments, longer wait times to see specialists,” Sauer said. “We expect to see layoffs in hospitals around the state, and that will definitely lead to longer wait times and then potential service closures.”

• Read more: Hospitals urge Congress to protect Medicaid

Even with hospitals making a modest rebound from the financial difficulties of the pandemic, 70% of the state’s hospitals and health systems are continuing to lose money from operations, the association says.

With reduced state support, hospitals may look at dropping labor and delivery, primary care, physical therapy, and mental health services. "Those are all possible things that we've heard from our hospital members that they're likely to cut," Sauer said.

‘Difficult decisions’ about services

The state’s hospitals have suffered about $4.5 billion in operating losses over the past four years, said Eric Lewis, chief financial officer of the Washington State Hospital Association.

“Many rural and urban hospitals are experiencing financial distress with large operating losses and decreasing cash positions,” Lewis said.

Washington’s bigger hospitals are faring better, but they are also facing financial difficulties, he said.

“Large hospitals across the state are experiencing unsustainable operating losses and decreasing cash positions,” Lewis said. “These large hospitals treat the sickest patients, and are critical resources for rural and other smaller hospitals to transfer patients.”

Lewis said the idea that larger hospitals can afford reduced state support “is simply not true.”

Dr. Tanya Sorensen, executive medical director for women and children at Providence North Division Institute, said Providence’s hospitals in the state have half the cash on hand that they did in 2019, the year before the pandemic.

Sorensen said if the state cuts are implemented, services such as behavioral health, pediatrics, and specialty services that are already operating at a loss will be affected.

“If the proposed cuts and increased costs are implemented, we will be forced to reduce services and programs vital to our patients,” she says. “And these are very vulnerable patients. These are pregnant women. These are kids.”

Women’s and children’s services rely heavily on Medicaid, and Sorensen said she is concerned about the impact of possible Medicaid cuts meaning fewer hospitals offering labor and delivery services in the state’s “obstetric deserts.”

She said people in the state’s rural areas will end up traveling farther, perhaps to Providence Swedish’s First Hill Campus in Seattle, potentially seeing “delays in both preventative and life-saving specialty care.”

Sorensen said reductions in state aid would lead to “extremely difficult decisions about what services we can provide to our community.”

“We would see longer wait times and reduced access, and the health of Washingtonians would clearly suffer,” she said.

‘An unsustainable situation’

Darryl Wolfe, CEO of Olympic Medical Center in Port Angeles, outlined the daunting financial problems for his 67-bed hospital. Wolfe said further reductions in aid to his hospital could lead to painful decisions.

“We find ourselves in an unsustainable situation,” Wolfe said. “We have eroded our days’ cash-on-hand from over 100 days to about 30 days. And that is not where you want to be, trust me.”

Olympic Medical Center serves a largely rural population. The hospital is independently operated, but its board is exploring the possibility of looking for a merger partner.

If a suitable partner can’t be found, “we will have to make radical cuts,” Wolfe said.

The hospital could consider reducing its number of beds, shrinking to the size of a critical access hospital. “That would be devastating for our community,” he said.

Dr. Andrew Jones, CEO of Confluence Health in Wenatchee, said the difficult financial environment has made it more difficult to modernize facilities.

“We desperately need to update our infrastructure, both for the benefit of our patients and our staff, and we're trying to do so,” Jones said. “But we're also currently spending money on a lot of short-term fixes, which can be very expensive.”

If state budget cuts lead to reduced support for hospitals, he said larger hospitals will see greater demands for their services, and it can mean delays in care for smaller providers such as Confluence.

“Healthcare is an ecosystem, and we rely heavily on our urban referral centers,” Jones said. “We take care of many patients in north-central Washington, and we do a lot of great care here at Confluence. But there are things we don't do here, and we rely on partners such as those at Swedish and other facilities to help us.

“If it becomes harder for us to refer patients to them because of the difficulties we mentioned, this is going to further strain our capacity and impact the quality of care that's provided in rural Washington,” he added.