Oregon Hospital Revenues, Profits Rise In Third Quarter of 2020

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Oregon’s hospitals have rebounded substantially from the financial slump induced by the COVID-19 pandemic and are moving back toward the profit levels they enjoyed prior to the pandemic, new data suggest.

The brisk resurgence is thanks in part to hundreds of millions of dollars in CARES Act grants the federal government handed to Oregon hospitals last year. So, whether the rebound continues this year without that aid remains an open question.

Hospitals have filed their public financial results for the third quarter of 2020, ending Sept. 30, and the numbers show that “most of Oregon’s hospitals are now returning to normal financial levels,” the Oregon Health Authority said last week.

Oregon’s big hospital systems – Providence, Legacy, PeaceHealth, Salem Health, Oregon Health & Science University – were all in the black as of the end of the third quarter, the new figures show.

The health agency said hospital profit margins statewide averaged 2.9% for the year through the third quarter.

But the hospitals’ trade group, the Oregon Association of Hospitals and Health Systems, takes a much bleaker view. Operating profits “were propped up by the infusion of CARES Act dollars. Without those critical federal funds, the (hospitals’) median operating (profit) margin in 2020 was -2.1%,” the association said. The group said it has hospital financial data for the entire year, although the full year numbers won’t be public until later this spring.

“While we appreciate OHA’s optimistic interpretation of the data, it does not tell the whole story, nor does it align with the experiences of hospitals during the pandemic. We are still a long way from being able to say that the financial impacts of the pandemic are behind us,” said OAHHS President and CEO Becky Hultberg.

“Hospitals are not generating enough net patient revenue to cover their operating expenses. Hospital patient volumes dropped sharply last year. … At the same time, expenses are up as hospitals bear the cost of caring for COVID-19 patients and pay inflated prices for scarce PPE,” the association said in a statement to The Lund Report.

“Oregon’s hospitals are fronting the cost of vaccine programs after the state asked hospitals to create distribution systems in early January. The association is still working with the state on how to reimburse hospitals for those costs,” the group added.  

Still, by any measure, things have improved since the pandemic hit in early 2020. Back then, in the first quarter, 41 of Oregon’s 60 acute-care hospitals reported losses, compared to just nine in 2019. Through the end of the third quarter, 15 are reporting losses.

Using COVID-19 As An Excuse

The financial condition of the state’s hospitals -- and of hospitals across the country -- has been heavily debated in the COVID-19 crisis. Hospitals said they were suffering dire revenue reductions as they cancelled surgeries to make room for patients sick with the virus. But as federal CARES Act grants flowed in and surgeries and other procedures resumed, the picture brightened. Some critics said the hospitals didn’t need the taxpayer aid, given that many have massive investment portfolios. Few if any Oregon hospital systems have actually dipped into their reserves during the crisis.

Other critics said hospitals used their temporary fiscal ill-health to delay improving their help to low-income residents, including their lowest-paid employees.

“For months hospitals have used COVID as an excuse to avoid or slow down industry reform desperately needed to protect the health of the communities they serve,” said the SEIU Local 49, a Portland-based labor union that represents thousands of custodians, food service workers and other lower-paid employees at hospitals in Oregon and Southwest Washington.

Oregon health care officials are relieved by the new financial results.

“Oregon depends on a stable health care system. During the pandemic, we’ve been focused on protecting people from the virus. But we also have been worried about the financial effects the pandemic on our health care system,” said Jeremy Vandehey, director of health policy and analytics at the Oregon Health Authority. “We remain concerned about the toll that the pandemic has taken on health care providers and workers over the last year, but (the new) data show that most of Oregon’s hospitals are returning to normal financial levels. We will continue to monitor this situation but some of our concerns about financial stability of the health system have been alleviated.”

All but two of Oregon’s hospitals are technically nonprofits, but all still focus on earning profits to salt away in reserves, in part to improve their bond ratings and make it cheaper to borrow for capital projects.

Some Hospitals In Better Shape Than Others

The third-quarter rebounds have varied from hospital to hospital.

Providence Health & System’s eight Oregon hospitals appear to have recovered their financial footing almost entirely, collectively producing a profit of $146 million in the first three quarters of 2020, compared to $148 million in the same period in 2019.

Many Providence hospitals struggled financially early in the pandemic.

“Providence, including Providence Portland, consistently cared for a large portion of the COVID patients in the state. However, Providence did not start billing for those patients until (the third quarter), once billing guidelines were set and implemented,” said spokesman Gary Walker. Also, the nonprofit system’s cost-cutting steps did not yield results until last summer, he said. The system trimmed the pay of many executives and other highly paid staff and also cut workers’ hours. And the chain received CARES grants. The eight-state, Renton, Wash.-based nonprofit system says it received about $1 billion in CARES money last year.

The Portland-based Legacy Health system has also rebounded. Its five hospitals – two in Portland, one in Gresham, one in Tualatin and one in Silverton – reported profits totaling $68 million for the first three quarters of 2020, almost on a par with the $71 million for the same period in 2019. The Legacy system received about $78 million in CARES Act money in 2020, according to federal data.

Legacy did not respond to a request for comment from The Lund Report.

However, in a March 1 letter to the Oregon Health Authority, Legacy said the pandemic has increased its annual operating costs, including staffing, by $35 million. It noted that there was “tremendous uncertainty” about any continued federal aid. Legacy said it expects revenues for its upcoming fiscal year, which starts April 1, to be down 5%-10%.

Others are still ailing, even with CARES money.

One of the Oregon hospital systems most hammered by the pandemic appears to be Bend-based St. Charles Health System. The nonprofit chain’s four hospitals went from producing a cumulative profit of $93 million in the first three quarters of 2019 to profit of just $1 million in the same period in 2020, despite receiving $31 million in CARES Act grants.

The system’s financial struggle continued into 2021, with an operating loss of $4.9 million in January, spokeswoman Lisa Goodman said. Now, about 150 medical technicians are on strike at the system, in a quest for better pay among other things.

“The timing of the strike is particularly challenging as St. Charles continues to suffer incredible financial losses due to COVID-19,” the system said.

The Vancouver, Wash.-based PeaceHealth system’s four Oregon hospitals – in Springfield, Eugene, Cottage Grove and Florence – were also still under the weather as of the end of the third quarter of 2020. Their total profits in the first three quarters of 2020 totaled $9 million, a far cry from the $47 million during the same period in 2019. The three-state 10-hospital system received $128 million in CARES Act money last year. PeaceHealth did not reply to a request for comment from The Lund Report.

At Salem Hospital in Marion County, profits for the first three quarters of 2020 totaled $61 million, compared to $102 million for the same period in 2019, according to the latest tallies. The hospital received $21 million in CARES Act money last year.

Net Patient Revenues Are Up

Data show that net patient revenue recovered quickly after elective procedures resumed in May 2020, the state said. In March, state officials ordered a halt to most surgeries to save staff and space in hospitals to care for expected influxes of COVID-19 patients.

The aggregate numbers show that cost-curbing measures by hospitals had an effect, the state said. Many hospitals furloughed staff, cut pay and postponed non-urgent expenses.

“While net patient revenue rose substantially (in the third quarter) from (the second quarter’s) very low levels, operating expenses remained flat. Year-to-date total operating expense (statewide) was $10.4 billion, which was 1.8% higher than the same period in 2019,” the state said.

SEIU has lobbied hospitals on pay and benefits for the employees the union represents. In a March 2 letter to the Oregon Health Authority, the union said that amid the pandemic, Legacy cut the shifts of hospital cleaning staff to 7.5 hours a day, from eight, the equivalent of a 6% pay cut. “The starting wage of a (hospital cleaner) at Legacy Emanuel (in Portland) is less than $15 an hour, far below the living wage in the Portland metro (area),” the union wrote.

“This is a health system that not only reported healthy profit margins in 2020, but also has more than $800 million in reserves,” the union told The Lund Report.

You can reach Christian Wihtol at [email protected].

 



 

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