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Despite massive investment portfolios, Oregon hospitals say they need the Legislature’s help

High-stakes legislation to address low staffing and spiraling labor costs have put hospital finances in the spotlight
Oregon’s strongest hospital systems are backstopped by massive investment portfolios swollen by many years of stock and bond market gains. But when hospitals plead for taxpayer help, they rarely mention these reserves. | SHUTTERSTOCK
February 23, 2023

Saying they are in financial peril, Oregon hospital systems are fighting bills that would increase their costs while pleading for as much as $1 billion a year in help from the recently convened state Legislature.

Lawmakers face the tricky task of balancing any assistance against competing demands from labor unions, such as increasing nurse-staffing ratios to slow burnout and improve patient care.

Hospitals claim a high-profile nurse-staffing bill modeled on California’s law would prompt them to close beds rather than increase staff.

Oregon hospitals’ requests for assistance run from modest to gigantic. The biggest: Hospitals want the state to boost how much it pays them to treat the Oregon Health Plan’s 1.4 million patients. If the state had to pay hospitals the actual cost of services, that increase could easily top $1 billion a year. Hospitals also want the state to pay them a yet-to-be-set amount per day for boarding many hundreds of patients who are ready to be discharged and produce little revenue, but for whom there is no space at nursing homes or rehab centers. On the less costly end, they want the state to pay hospitals for hosting nursing students on clinical rotations.

Those are just a few items from the wish list of the Oregon Association of Hospitals and Health Systems, the industry’s trade group.

But the extent of the struggles cited by hospitals depends on which hospitals and what financial data one looks at.

Many individual Oregon hospitals have run steep operating losses in recent quarters, which has become a staple of hospital association arguments in Salem. With poor cash flow and high operating expenses, several systems including Bend-based St. Charles Health, may be close to violating financial covenants with bondholders. These systems have been scrambling to renegotiate terms or find alternative financing.

At the other end of the spectrum, Oregon Health & Science University in January surprisingly reported patient revenue had rebounded handsomely, yielding a large profit for the second half of 2022. Oregon’s strongest hospital systems, like OHSU, are backstopped by massive investment portfolios swollen by many years of stock and bond market gains. When hospitals plead for taxpayer help, they rarely mention these reserves.

With hospital finances a key issue, The Lund Report examined a decade’s worth of financial statements, plus credit ratings reports and other records for the nine largest hospital systems operating in Oregon. The Lund Report also interviewed experts in Oregon and around the country. 

The findings underscore that many Oregon hospital systems have financial muscle. The nine systems’ total net worth — assets minus liabilities, a standard measure of financial health — has grown 272% in the last 10 years, and their total investment portfolios are up 230%. That growth rivals the nation’s best stocks.

And yet, Oregon’s hospitals face unnerving problems as well.

‘Very strong’ hospital system seeks help

Salem Hospital, a mile south of the State Capitol, epitomizes the contradictions.

The 644-bed, 5,000-employee hospital is the flagship of nonprofit Salem Health and dominates the Marion County market.

Is Salem Health hurting? Not according to the latest Fitch Ratings report, issued in January.

Fitch kept Salem Health’s bond rating at AA, close to the top of its fiscal health scale ranging from D to AAA. Fitch lauded Salem Health’s “very strong financial profile” and “very strong balance sheet.” Despite recent revenue dips, Salem Health will “return to strong cash flow generation over the next few years,” Fitch predicted.

Audited financial statements issued by Salem Health illustrate the system’s robust health.

The two-hospital system has a net worth of $1.2 billion, including an investment portfolio of $917 million, according to its most recent statement. Net worth is the value of all assets such as buildings, equipment and investments, minus all liabilities such as debt.

In the past 10 years, Salem Health’s net worth has more than doubled, and its investment portfolio nearly tripled in size over a period when the consumer price index rose 29%.

The key to this wealth accumulation was a long string of highly profitable years. From 2014 to 2021, Salem Health reaped a total of $387 million in operating profits and $386 million in investment gains, its reports show.

But it’s also true that Salem Health’s fortunes have recently been shaken by skyrocketing labor costs, erratic patient revenues and flagging stock and bond values. From July 2021 through to Sept. 30, 2022, the latest figures available, the system recorded operating losses of $31 million and investment declines of $154 million.

In December, when then-Gov. Kate Brown issued an emergency declaration allowing hospitals to request state-funded nurses, Salem Hospital requested 330 of them, far outstripping other hospitals’ stated needs.

Salem Health downplays but also defends its financial strength. It costs over $1 billion a year to run the system, so from that perspective the investment portfolio is not that impressive a reserve, according to spokesperson Lisa Wood. Plus, Salem Health has more debt to service now, she said. Its long-term debt stands at $484 million, up from nearly $300 million in 2014.

“Because of (the) too-important-to-fail nature of our business, the community should actually expect, possibly demand, that we have a financial cushion so we do not ever close. It would be operationally irresponsible to run a hospital with low or no investment reserves.”

“Because of (the) too-important-to-fail nature of our business, the community should actually expect, possibly demand, that we have a financial cushion so we do not ever close. It would be operationally irresponsible to run a hospital with low or no investment reserves,” Wood told The Lund Report.

The system is among those now asking for further taxpayer help. CEO Cheryl Nester Wolfe on Feb. 3 wrote to the Legislature in favor of Senate Bill 486, which would require the state to pay hospitals what it costs them to hold patients who can’t be discharged because recovery facilities such as nursing homes lack space.

Salem Health “routinely boards approximately 90 patients who are waiting for post-acute beds. When patients no longer need acute care, (insurance) reimbursement ceases to flow to the hospital,” she wrote. “This is financially unsustainable.”

Fear of the future

When asked about their hefty reserves, representatives of hospitals not only cite their recent operating losses but say they are intensely worried about the future.

About half of U.S. hospitals incurred operating losses for 2022 — and 2023 may be worse, said Matthew Bates, a managing director at KaufmanHall, a Chicago-based consulting firm that works for the American Hospital Association trade group.

Among the concerns: Hospitals in Oregon and many other states will soon likely face a wave of uninsured patients who won’t have the means to pay for care, Bates said. That’s because the federal government declared the COVID-19 pandemic emergency over, effective in May. That means states will begin dropping people from Medicaid who earn too much for the taxpayer-funded insurance but were allowed to stay on during the pandemic. In Oregon, as many as 300,000 people may be dropped from the Oregon Health Plan, Oregon’s version of Medicaid, according to the Oregon Health Authority. Those who don’t obtain alternative insurance may need to be treated as charity cases by hospitals.

For hospitals nationwide, “expenses are up a lot more than revenue, and we’re probably going to get more uninsured … it would be folly to predict you are going to have big investment income in 2023,” Bates told The Lund Report.

Other health care players disagree

An additional complicating factor facing legislators: There’s disagreement in the health care sector itself over whether hospital systems deserve new help from the state.

The solution to the problem of patients being kept at hospitals due to a shortage of rehab center beds isn’t for the state to make special payments to hospitals, a health insurance executive told lawmakers at a recent hearing in the State Capitol. 

“We need more nursing facilities, we need more residential treatment options, we need more senior services and home health options,” said Josh Balloch, vice president of Medford-based AllCareHealth, a Medicaid and Medicare insurer.

Part of the fault for that problem lies with companies that operate nursing homes and rehab centers, said Kevin Mealy, a spokesperson for the Oregon Nurses Association labor union. “Long-term-care corporations … refuse to acknowledge or improve their own poor working conditions which is why they can’t recruit or retain qualified staff,” he said.

Meanwhile, the nurse-staffing bill pushed by the union, which represents over 12,000 nurses, would force hospitals to hire more nurses, driving up hospital spending. Hospital systems should use their investment reserves for that, Mealy said.

Fixing the health care staffing shortage must start with “raising staffing standards to prevent our most experienced nurses from burning out and leaving the bedside due to the untenable working conditions,” Mealy said.

Nor is there consensus about how to measure hospitals’ financial health. How important are quarterly operating losses of individual hospitals? How important are the investment reserves held by parent hospital systems, which are not reflected in individual hospital financial results? With all major Oregon hospital systems raising money through bond issues, how important are cash flow, debt service and how many days cash on hand — the measures that bond holders and ratings agencies closely track?

The hospital industry’s continual focus on hospital quarterly operating losses presents only part of the picture, some observers said.

“When hospitals talk about their financial health, they always talk in terms of ‘patient care revenue’ and never mention their other considerable sources of financing, from parking, gifts, research, investments, and more. This provides a singularly distorted view of their financial health.”

“When hospitals talk about their financial health, they always talk in terms of ‘patient care revenue’ and never mention their other considerable sources of financing, from parking, gifts, research, investments, and more. This provides a singularly distorted view of their financial health,” John McDonough, a professor in the Department of Health Policy & Management at Harvard University, told The Lund Report.

Regardless, some key Oregon lawmakers say they are sensitive to hospitals’ concerns

“Hospitals are certainly in a very serious spot,” said Rep. Rob Nosse, D-Portland, chairman of the House Committee on Behavioral Health and Health Care. “That fact will be a part of all of the conversations we have on the committee. We are committed to working with hospitals and their staff to figure out how we can best support them in increasing their workforce and addressing the financial difficulties they are facing as well,” he told The Lund Report.

Lawmakers face tough decisions due to the magnitude of the help hospital lobbyists are seeking. In particular, hospitals are again bringing up a perennial complaint: the reimbursement rates the state and federal governments pay them for patients covered by the Oregon Health Plan. Hospitals contend the payments don’t come close to covering hospitals’ real costs, and they want the state to up its payments. In the latest data available, Oregon hospitals claimed that in 2021, government payments for Oregon Health Plan patients fell more than $1 billion short of the actual cost. Even with additional requested funding, OHP payments would fall short of covering hospitals' real costs, said hospital association spokesperson Lisa Goodman.

With hospital costs rising so quickly due to wage escalation and inflation, the customary small annual increases in Medicaid and Medicare payment rates are insufficient, said Bates, the hospital industry consultant. “If nothing changes, those (hospital) reserves are going to get depleted really fast.”

Hospitals face mix of short-term, long-term trends

A slew of sometimes countervailing dynamics are affecting hospital bottom lines. Here’s a breakdown of what’s happening with Oregon’s health systems:

Bond covenant pains: The financial performance of some Oregon hospital systems lags others. With operating losses and poor cash flow in recent quarters, “several” Oregon hospital systems have likely breached their agreements with banks or bond holders, said Bates, the KaufmanHall consultant. He declined to name the systems, which he said KaufmanHall is working with. These systems are falling into “technical default” because they don’t have specified reserve levels or cash on hand, said Lisa Goldstein, a senior vice president at KaufmanHall. “They have the money, they make the payments, but you’ve got to make those covenants as well,” she told The Lund Report. Moody’s bond rating service, in a September 2022 report, said that once audits for 2022 are completed on St. Charles Health, they may show the system has violated bond covenants for cash flow, cash on hand or other debt service requirements. “(St. Charles) management is actively in discussion with counterparties to explore all available options,” Moody’s wrote. St. Charles did not respond to a request for comment from The Lund Report. Solutions to covenant violations can include higher interest rates or credit rating downgrades that can make future borrowing more expensive.

Affordable Care Act gains: From 2014 to the onset of the pandemic in 2020, the great majority of Oregon hospital systems enjoyed unprecedented operating profits. That was largely because in 2014 the state expanded the Oregon Health Plan under the federal Affordable Care Act to cover more residents. Many patients who previously were unable to pay for hospital care and had to be written off by hospitals as charity or bad debt, were now covered by taxpayer-funded insurance. For example, at Legacy Health’s five Oregon hospitals, total operating profits from 2014 to 2019 averaged $79 million a year, nearly double the annual average profit of $44 million in 2007-2013. (All but two of Oregon’s 62 main hospitals are nonprofit organizations, so that surplus money went into savings or future spending, rather than being paid out to shareholders.)

At the PeaceHealth system’s flagship Riverbend Medical Center in Springfield, average operating profits rose to $90 million a year in 2014-19, up from an average of $30 million a year in 2009-2013. Meanwhile, RiverBend’s annual cost of uncompensated care dropped by an average of $30 million a year from the 2009-13 period to the 2014-19 period, PeaceHealth’s filings with the state show. 

“No doubt, the ACA expansions have been a boon for hospitals in expansion states,” McDonough said.

Stock market boost: Many Oregon hospital systems salted much of that excess cash into stock and bond investment portfolios that zoomed skyward in the long bull market. Major U.S. stock indexes doubled or more from 2014 to 2022, and have now partially recovered from drops in the autumn of 2022. Many Oregon hospital systems now have portfolios two, three or more times what they had a decade ago. That has boosted most systems’ net worth. The three-state Vancouver, Wash.-based PeaceHealth system’s investment portfolio more than quadrupled, to $1.5 billion in 2022, from $366 million in 2012. That pushed the system’s net worth to $2.3 billion, up from $1.6 billion a decade earlier. 

“Hospital systems have become financial powerhouses in recent years,” said Alan Cohen, a research professor in markets, public policy and law at Boston University.

In many years up until 2022, Oregon hospital system investment returns were as big as the profits hospitals made on their health care services. At many of the systems, the investment portfolios now are worth more than the systems’ bricks and mortar hospitals and medical equipment.

With the stock market treading water at near-record highs, it’s unclear whether hospitals will return to the happy days of pre-pandemic strong investment returns.

Net worth growth: Most Oregon hospital systems are not eager to talk about their investment portfolios. One exception is OHSU, whose CFO, Lawrence Furnstahl, makes a point at quarterly board of director meetings to detail the performance of OHSU’s investment portfolio and note changes in OHSU’s net worth.

In the board’s January meeting, Furnstahl reported that the net worth of OHSU and its foundation is up 10% - to $4 billion - since just before the start of the pandemic. The rise is largely due to investment gains, with OHSU and its foundation now holding nearly $3 billion in investments and cash. Like Salem Health, OHSU has an AA- bond rating from Fitch.

Wage inflation: Oregon hospitals are having to pay rapidly rising wages to overcome staff shortages and hold onto workers, even as they also face inflation for supplies and other purchases. As of May 2021, the latest data available, Oregon wages for registered nurses were among the highest in the nation, according to the U.S. Bureau of Labor Statistics. The state average RN pay was $98,630 a year, behind only California and Hawaii. 

Higher pay, whether for permanent staff or temporary contract workers “is now a permanent part of a higher expense structure,” Goldstein said. At many hospitals, operating revenues have picked up after slumping during the height of the pandemic when hospitals postponed elective surgeries. But wage increases have often eaten up most or all of the revenue rebound. At Legacy Health, patient service revenues rose $300 million in the 12 months ended March 2022 from the previous 12 months. But wages and benefits jumped $200 million, and supplies, utilities and insurance rose $80 million.

Medicare, Medicaid reimbursements lag: On the national level, Medicaid and Medicare reimbursements are not keeping pace with escalating costs because of how the programs are designed.

High overall costs: Also troubling: Oregon in-patient per-day hospital costs are already exceptionally high. In 2021, the average in Oregon was $3,861 per day, behind only California and the District of Columbia, the Kaiser Family Foundation reported recently.

Medicaid rolls shrinking: The Oregon Health Authority will begin vetting all Oregon Health Plan members’ incomes starting later this spring, a process that could take as much as 14 months. Eventually, OHP membership will likely be trimmed by as much as 300,000 from its current level of more than 1.4 million. It’s unclear how many of those who are dropped will buy or obtain insurance elsewhere, or will seek care at hospitals and be unable to pay.

Regulatory restrictions loom: The uncertainty comes as Oregon legislators and regulators in recent years have pressed ever more aggressively to limit the rate of health-care spending growth and guide how hospitals function. 

Programs imposed by lawmakers in recent years include mandatory and increasing levels of “community benefit” spending by hospitals; state review of mergers and acquisitions by hospitals and other large health care entities; and capping annual per-capita spending growth by hospitals and other large health care entities.

Hospitals dislike all the restrictions and are now trying to loosen some.

For example, citing the massive inflation rates caused by pandemic-era labor shortages, the Oregon hospital association wants legislators to exempt a large portion of hospital expenditures, including caring for Medicaid and Medicare patients, from the state’s per-capita spending growth cap. But labor unions say they want to keep the spending growth cap system intact, saying it would help keep care affordable.

Break-even ahead?

The outlook for hospitals nationwide, according to Fitch Ratings, is touch and go for 2023.

“For (hospitals) that suffered significant operational losses in 2022, Fitch believes that break-even on a month-to-month basis should return sometime in 2023, with gradual improvement from there.” 

Financially healthier systems may return to profitability early this year, Fitch wrote in a December report. And a select few systems will continue to enjoy strong operating profits, “which is a mark of distinction in the current sector landscape.”

Financial snapshot of the major hospital systems operating in Oregon 

Based on the latest financial statements, ten years of financial reports to the state, and bond ratings reports.


Three-hospital Medford-based system.

Sept. 30, 2022 net worth: $957 million, including investment portfolio of $604 million

2012 net worth: $547 million, including investment portfolio of $460 million

Results for fiscal year ended Sept. 30, 2022: operating loss of $61 million on operating revenues of $1.2 billion; investment portfolio decline of $181 million.

Fitch rating in January: A+ rating. “Negative outlook reflects Asante’s weakened operations and moderately more constrained balance sheet consistent with inflationary pressures on labor and supplies, recent market volatility, and post-pandemic operating challenges.” But Asante has “strong market position as the single largest provider of acute care services in its primary service area.”


California-based integrated managed care group serving eight states, consisting of 39 hospitals, including two in Oregon, plus health insurance plans and physician groups.

Net worth Sept. 30, 2022: $49.2 billion, including $44.9 billion in long-term investments

Net worth 2012: $14.2 billion, including $19.5 billion in long-term investments

Latest results: For nine months ended Sept. 30, 2022, operating loss of $58 million on operating income of $72 billion; investment decline of $4.3 billion. Kaiser’s two Oregon hospitals, Kaiser Sunnyside and Kaiser Westside, reported operating losses totaling $21 million for the first half of 2022.

Fitch rating May 2022: Rating kept at AA-. “Very strong financial profile,” with “market lead in California and other key areas.” 


Portland-based system with six hospitals in Oregon (including a children’s hospital), one in Washington.

March 31, 2022 net worth: $2.2 billion, including investment portfolio of $1.2 billion.

2011 net worth: $822 million, including investment portfolio of $523 million.

Results for fiscal year ended March 31, 2022: $31 million operating profit on operating revenues of $2.5 billion, and investment gain of $18 million. Reports filed with the OHA for April-June 2022 show an operating loss of $10 million at the five Oregon hospitals.

Moody’s rating April 2022: A1 (on scale of Aaa-C). “Operating performance will improve materially over the next two years, and current balance sheet measures will be maintained despite high levels of capital spending …. Ongoing challenges include: currently low profitability, driven by elevated labor costs and high employee vacancies; an elevated rate of capital spending over the next several years … ongoing losses from the mental health joint venture which Legacy leads (Unity Center for Behavioral Health).” 


Portland-based academic health center, with hospital, children’s hospital, medical school and foundation.

Dec. 31, 2022 net worth: $4 billion, including $3 billion in investments and cash

2012 net worth: $1.9 billion, including $1.2 billion in investments and cash.

Results for six months ended Dec. 31, 2022: $56 million profit on $2.2 billion operating revenues; investment portfolio decline of $25 million.

Fitch rating October 2022: Kept at AA-.


Three-state Vancouver, Wash.-based system with four hospitals in Oregon, five in Washington and one in Alaska.

June 30, 2022 net worth: $2.3 billion, including investment portfolio of $1.5 billion.

2012 net worth: $1.6 billion, including investment portfolio of $366 million

Results for fiscal year ended June 30, 2022: Operating loss of $251 million on operating revenues of $3.2 billion; investment portfolio decline of $344 million.

Fitch rating March 2022: AA-. PeaceHealth has “geographic diversity and solid market position combined with its strong and stable balance sheet … but improvement in operating margins is necessary over the near to immediate term to remain at the current rating.” 


Six-state system with 52 hospitals, including eight in Oregon.

Net worth Sept. 30, 2022: $12 billion, including investment portfolio of $7.8 billion.

Net worth 2012: $6.7 billion, including $3.5 billion investment portfolio.

Results for nine months ended Sept. 30, 2022: Operating loss of $1 billion on operating revenues of $20 billion; investment portfolio drop of $1.3 billion.

Fitch rating April 2022: Bond rating downgraded to A+ from AA-, reflecting “more constrained balance sheet.” But Providence still benefits from being “the leading acute care provider in all of its markets.”


Four-hospital Bend-based system.

Net worth Sept. 30, 2022: $719 million, including investment portfolio of $608 million

Net worth 2012: $367 million, including investment portfolio of $261 million

Results for six months ended Sept. 30, 2022: operating loss of $30 million on operating revenues of $751 million; investment drop of $123 million, including sale of $53 million worth of investments to cover operating costs.

Moody’s rating September 2022: Rating kept at A2, but dropped to “negative” from “stable.” Full year results for 2022 will provide “at best thin headroom to the system’s debt service coverage covenant. ... Operating challenges include: chronic understaffing, the heightened use of travelers (temporary contract nurses); increased length of stay due to the shortage of (nursing home) beds, and high inflation. Liquidity has been weakening with days cash on hand dropping to its lowest point in six years. … The negative outlook also reflects the ongoing decline of balance sheet measures, which if further weakened could additionally erode St. Charles' credit quality.”


Salem-based system with Salem Hospital and West Valley Hospital in Polk County.

Net worth June 30, 2022: $1.2 billion, including investment portfolio of $917 million.

Net worth 2012: $504 million, including investment portfolio of $334 million.

Results for fiscal year ended June 30, 2022: Operating loss of $3 million on operating revenues of $1 billion; investment portfolio drop of $118 million.

Fitch rating January: Rating kept at AA-. “Stable.” “Despite investment market volatility and operational challenges negatively impacting the organization, Salem's balance sheet resources remain satisfactory.”


Corvallis-based five-hospital system

Net worth Sept. 30, 2022: $533 million, including $132 million in long-term investments

Net worth 2012: $267 million, including $53 million in long-term investments.

Results for nine months ended Sept. 30, 2022: Operating profit of $16 million on operating revenue of $1.2 billion; investment declines/losses of $27 million.

You can reach Christian Wihtol at [email protected].