OHSU financial upswing continues as other hospitals falter

Leaders of the state’s flagship medical institution, Oregon Health & Science University, are taking heart in a surprising surge in OHSU revenues and profits — and so are the institution’s 3,000 nurses, who are pushing for big wage increases during ongoing contract negotiations.

On Wednesday, OHSU’s governing board was told that despite a bleak break-even budget projection, the institution’s net operating profits for the nine months that ended March 31 totaled $82 million on operating revenues of $3.4 billion — representing a 2.4% profit margin.

Big increases in revenue from surgeries, emergency room usage and the pharmacy business drove the uptick, reported the institution’s Chief Financial Officer Lawrence Furnstahl.

But Furnstahl said the university, a partially taxpayer-funded corporation with state-granted independence, still faces challenges that include rapidly increasing wages. Pharmaceutical costs, meanwhile, are growing at an estimated 10% a year, much faster than the reimbursement rates paid by major insurers.

OHSU’s profits are something of a rarity in Oregon’s hospital industry. Many hospitals reported operating losses last year. 

“Rising expenses, workforce shortages, and stalled revenue” resulted in a -2.8% median operating loss for hospitals across the state in 2022, the Oregon Association of Hospitals and Health Systems announced earlier this month. Most hospitals’ financial results for the first quarter of 2023 are not yet publicly available; OHSU’s are an exception.

Furnstahl noted that OHSU’s biggest employee group — roughly 7,500 AFSCME-represented workers that include — is receiving an across-the-board 7% pay increase in the current contract year, with 5% raises in each of the following two years. Those hikes, agreed to last fall, are nearly twice the rate of the increases in the previous three-year contract, he told the board. On top of those pay raises, many AFSCME-represented workers receive annual so-called progression increases that reflect longevity on the job and can equal several percentage points a year. AFSCME represents a wide range of employees, from cleaning and food-service staff to computer programmers.

OHSU is now negotiating with the Oregon Nurses Association on a new contract that would kick in after the current three-year contract expires in June. The union represents about 3,000 registered nurses and other nurses at OHSU.

OHSU has offered an across the board 6% increase for 2023, followed by 3% in each of 2024 and 2025, for a total of 12 percentage points, according to the nurses union negotiating team’s blog. 

That’s far below the current management proposal for Oregon Nurses Association-represented nurses at some Providence Health & Systems Oregon hospitals of 8%-14% in 2023, 2.5% in 2024, and 3% in 2025, for a total of 19.5%, the blog said. At the Bend-based St. Charles Health system, management is offering three-year pay increases totaling 21%, the blog said.

OHSU needs to up its offer in order to hold onto staff, according to the blog, 

which added that the union “remains committed to holding OHSU management accountable to investing in the retention and recruitment of nurses. OHSU’s current economic offer fails to do just that.” 

All told, OHSU has about 12,500 workers. 

Big pay increases plus persistent increases in drug costs would be enough to erase $120 million a year worth of profits in a $4 billion annual OHSU budget, Furnstahl told the board.

“OHSU’s structural financial challenge is the gap between (insurance reimbursement) rate growth and unit cost inflation, especially wages and benefits,” he told the board.

According to Furnstahl’s report, to keep achieving a profit, OHSU needs to focus on hiring in departments that yield high financial returns and improve safety; recruit and keep full-time employees to reduce reliance on costly temporary contract labor; increase use of operating rooms; increase use of pharmacy and imaging services; and negotiate contracts with commercial insurers “that reflect (the) higher-inflation environment.”

 You can reach Christian Wihtol at [email protected].