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Oregon hospital revenues rebound, but costs also surge

After pandemic, Oregon hospital systems inch back toward profitability, but many still report operating losses, latest filings show
Oregon Health & Science University | MICHAEL MCDERMOTT/OHSU
March 19, 2024

Leaders of Oregon’s hospitals hoped that by now they would be well on the mend from the financial ravages of the COVID-19 pandemic. But for some, the effects look like they will linger.

In a report last week, the Hospital Association of Oregon, an industry trade group, painted a bleak picture and called on the Legislature to take action.

The latest financial reports reviewed by The Lund Report, however, show a more nuanced situation, with impacts falling differently on different facilities— and with losses at many small hospitals offset by healthy profits at the larger ones.

The reports show that revenues are rising as business picks up at most Oregon hospital systems. But costs, especially pay for practitioners and union-represented nurses, are also up sharply, in what is being termed a “labor-demic.”

As a result, many Oregon hospitals’ expenses continue to outstrip operating revenues — with recent growth in the systems’ stock and bond portfolios the only consistent bright spot.

In a report last week, the Hospital Association of Oregon announced that the state’s 61 community hospitals posted a median -1.3% operating loss in 2023. That’s an improvement from their median -2.8% loss in 2022, the group said. The median is the mid-point, with an equal number of hospitals above and below it. The median method doesn’t take into account the relative sizes of the hospitals and their dollar profits or losses.

But another set of numbers paints a different picture.

Collectively, the 61 hospitals as a whole broke even on operational expenses. As a group, they reported an operating profit of $17.2 million on operating revenues of $18.5 billion for 2023, according to data provided to The Lund Report by the hospital association. That’s up from a collective -2.3% operating loss in 2022, according to the Oregon Health Authority’s database of hospital financial reports. But it is still less than the 3% percent profit margin that industry representatives describe as healthy.

The difference reflects that operating losses are persisting at many small hospitals, while many of the larger ones are recovering.

Regardless, hospital leaders are anxious.

“We had thought that (2023) would be the period when hospitals would be recovering from COVID (financially), but it looks like instead we are in the new normal,” with costs persistently leapfrogging ahead of revenues at many hospitals, Becky Hultberg, the association’s CEO, told The Lund Report.

Reimbursement rates from all types of insurers – Medicare, Medicaid or commercial insurers – are lagging, Hultberg said. That’s been a longstanding hospital lament, but since the pandemic it has resurfaced with a vengeance.

The vast majority of Oregon’s hospitals are owned by nonprofit chains called health systems, with a few others operating as government or quasi-public entities. Two are owned by for-profit corporations.

Despite their name, the nonprofits typically aim for an annual margin, or profit, that they can salt away into reserves to fund new construction or cover emergencies. For most, that model went up in smoke during the pandemic, when profitable surgeries and other traditional functions plunged and labor costs spiked.

The numbers highlighted in quarterly individual hospital reports don’t include the performance of the large investment portfolios held separately by hospitals’ parent systems.

But even with COVID fading, the road ahead for many hospitals looks foggy.

“We had thought that (2023) would be the period when hospitals would be recovering from COVID (financially), but it looks like instead we are in the new normal,”



Labor costs, insurer tensions 

Epitomizing the labor-cost dilemma hospitals are facing is Oregon Health & Science University, which after a better-than-expected performance for part of last year reported an operating loss for the six months that ended Dec. 31. The institution’s chief financial officer cited one-time bonuses it handed late last year to 2,000 non-unionized managers plus a contract it signed with its 3,100 unionized registered nurses in November that provided an immediate 15% pay raise, plus more raises totaling at least a further 19% through July 2025.

Hultberg said the public can expect to see more friction between hospitals and commercial insurance companies, with hospitals pressing for higher reimbursements. These disputes have been  cropping up with increasing frequency.

Typically, a quarter or more of a hospital’s patients are on commercial plans.

Another point of tension: hospitals want increased reimbursement rates for low-income patients on the Oregon Health Plan, which covers roughly a quarter of Oregonians. OHP, Oregon’s version of Medicaid, is funded by federal and state taxes, and controlled by federal and state officials and regional insurers. At many Oregon hospitals, from a quarter to a third or more of patients are on OHP. Hospitals plan to highlight the issue for the long session of the Oregon Legislature in 2025, Hultberg said.

“It is critical to look at Medicaid,” she said.

Oregon policy makers and health care leaders still need to address two other problems: how to increase the supply of health care workers, and how to create more post-hospital care facilities such as rehabilitation or nursing facilities, she said.

Becky Hultberg, CEO of the  Oregon Association of Hospitals, speaks at a press event following the 2023 legislative session. 

These facilities – to which hospital patients are discharged – are crucial for hospitals. The shortage of rehabilitation beds – and the staff to run them -- became a crisis during the pandemic. Once a patient is medically fit to be discharged from a hospital, the insurer cuts its reimbursement rates, even if the patient must remain at the hospital, occupying a hospital bed, simply because there is no space available at rehabilitation facilities. During the pandemic, Oregon hospitals reported housing hundreds of COVID patients who could have been discharged to lower levels of care, had there been enough of those beds.

In their latest financial filings, many Oregon hospital systems report this situation is easing. They say average patient length of stay is dropping, which helps their finances. For example, at PeaceHealth, which has three Oregon hospitals – the average length of stay systemwide dropped to 4.73 days in the six months ended Dec. 31, down from 5.28 days in the year-earlier period. 

But improvements like that aren’t enough on their own to repair a hospital’s finances. Overall, PeaceHealth, with hospitals in three states, reported an operating loss of $53 million for the six months ended Dec. 31, compared to a loss of $109 million for the same period a year earlier.

Hultberg predicted continued moves by some Oregon hospitals to curtail some services or facilities to save money. For example, in an action that drew community criticism, PeaceHealth recently largely shuttered its University District hospital in Eugene, which was a chronic money loser for the Vancouver-based system.


Stock investments a boon

The nonprofit hospital systems serving Oregon have large investment portfolios that have done well, reflecting the strong rise in stock prices through 2023 and high interest rates for cash.

At Salem Health, for example, the nonprofit system’s investment portfolio ended 2023 at $898 million, up $50 million from just six months earlier.

But looking at just operational revenues and expenses, the system barely broke even in the final six months of 2023. And that was an improvement to Salem Health’s operating loss of $35 million in the year-earlier period.

Investment returns “are not a panacea,” Hultberg said. “They are separate from the (operational) financial problems of hospitals.”

Not least of those problems is the cost of labor. Most Oregon hospital systems report that they have been able to hire and hold onto permanent workers, including registered nurses, more easily in recent months. That’s let them shed very expensive temporary contract workers.

But the Oregon Nurses Association, the labor union that represents registered nurses at most Oregon hospitals, has been hugely successful at winning big pay raises in the last couple of years. For example, after a strike last year, nurses at Providence Portland Medical Center won pay increases of 17% to 26.7% over the two-year life of a new contract, according to the ONA.

ONA-represented nurses have ongoing negotiations on expired contracts with Providence hospitals in Newberg, Portland, and Willamette Falls, said ONA spokeswoman Myrna Jensen. Plus, ONA contracts expire this spring at Providence hospitals in Medford, Hood River and Milwaukie, she said, and new ones will need to be negotiated. The union wants to bring Providence wages up to the new level established by the OHSU contract, but Providence management is resisting, Jensen said. With progress meager at the bargaining table, the nurses plan informational pickets around the state later this month, Jensen said.

Nurses and their allies on the first day of a strike at Providence Portland Medical Center in June 2023. 


Here are snapshots of the latest financials of the major nonprofit hospital systems in the state:


Operating revenues at Oregon’s cornerstone medical institution for the six months ended Dec. 31 were up a strong 10.7% from the year-earlier period, to $2.5 billion, according to OHSU’s latest filing.

The increase “reflected strong demand for OHSU services, together with improved staff, access and throughput,” the filing said.

But expenses, especially payroll and supplies, rose even faster – at 15.4%. That led to a $26 million operating loss for the six months, compared to an operating gain of $56 million for the year-earlier period.

The new two-and-a-half-year labor contract for registered nurses gave an immediate across the board pay increase of 15%, to be followed by 6% in July 2024 and 6% in July 2025. The contract also gives nurses a step increase every year of about 3.5%.

Labor costs will be further driven up by a new state law that sets hospital nurse staffing ratios and mandates that nurses be covered when they take meal and rest breaks, OHSU CFO Lawrence Furnstahl told the OHSU board in a report in January.

“OHSU remains in an ongoing ‘labor-demic’ with significant staff shortages, intense wage pressure, and heightened inflation,” he wrote.

To try to solve the dilemma, OHSU is pursuing a program it calls “Improving Financial Performance,” which includes a greater focus on profitable cancer care and complex surgeries; working more efficiently; prioritizing new hires in areas that generate new revenue; and further reducing expensive contract labor.

The value of cash and investments held by OHSU and its foundation topped $3 billion as of Dec. 31, up from $2.9 billion six months earlier.

“OHSU remains in an ongoing ‘labor-demic’ with significant staff shortages, intense wage pressure, and heightened inflation,”



Providence Health & Services, the multi-state nonprofit chain with eight hospitals in Oregon, took encouragement from the fact that its operating losses in 2023 weren't as deep as those in 2022.

But bond analysts are skeptical about the system’s financial performance.

The system reported a $1.2 billion operating loss on $28.7 billion in operating revenue for the calendar year. That’s rosier than the $1.5 billion loss on $26.4 billion in revenue in 2022, the company noted in a news release.

“Despite continued economic and workforce challenges, we ended the year on a positive note, providing strong momentum going into 2024,” said Dr. Rod Hochman, Providence’s CEO, said in a statement.

To cover the losses, the chain has had to spend down its cash and investment reserves. At the end of 2023, cash and investments totaled $8.4 billion, down from $9.4 billion 12 months earlier.

The system’s financials were on an upswing in the second half of 2023, the system emphasized.

Among the reasons it cited: “Higher post pandemic demand for patient services and decreases in length of stay as patient access to post-acute care improved through the second half of 2023.”

The chain’s Oregon hospitals reported mixed results. The giant Providence St. Vincent Medical Center in Portland reported an operating profit of 10% for the first three quarters of 2023, while the system’s other big Oregon hospital, Providence Portland Medical Center, reported a 5.4% operating loss for the three-quarter period.

Reflecting Providence’s struggles, the Fitch ratings service in March 2023 cut the system’s bond rating to A, from A+. In a review earlier this month, Fitch kept Providence at the lower rating and said it expected the system to reach operational break even by 2025 or 2026.

“Should Providence not be successful in 2024 and suffer another year of significant operational losses similar to the last two fiscal years, this could throw Providence's recovery trajectory off schedule” and trigger another ratings cut,” Fitch warned.

large brick building beneath clouds
Providence Portland Medical Center.


The seven-hospital non-profit system dodged reporting an operating loss for the nine-month period ended Dec. 31 only because it sold a laboratory business for $99 million during that period, which it reported as operating revenue.

Without that one-time revenue, the system would have reported an operating loss of about $30 million for the period, its filing shows.

Legacy and OHSU say they are working on a merger plan, but the operating losses at both systems have prompted questions about the viability of that deal.

Legacy runs on a fiscal year that ends each March 31.

For the nine months ended Dec. 31, it had operating revenues, including the lab sale income, of $2.17 billion, up from $1.9 billion the same period a year earlier. Its operating profit was $69 million, up from a loss of $114 million in the year-earlier period.

Unlike most Oregon hospital systems, Legacy is largely non-unionized. At only two of its smaller hospitals are registered nurses unionized via the Oregon Nurses Association, and at two of its large hospitals, the only union-represented workers are cooks, cleaners, nursing assistants and other similar employees. Overall, at its major hospitals there are no union pay scales and contracts that reveal rates of increase for what the staff are paid.

Still, in its financial filings, Legacy said it faced rising personnel costs that it was trying to offset by reducing contract labor, reducing “premium pay” for workers, improving productivity and curbing expenditures on supplies.

In November, the S&P Global Ratings service trimmed Legacy’s bond rating to A, from A+, to reflect its weaker earnings.

Office space for Legacy Medical Group in Northwest Portland.



The Vancouver, Wash.-based nonprofit system is inching toward operating profitability, in part by paring wages and contract labor costs.

For the six months ended Dec. 31, the latest data available, operating revenue rose to $1.7 billion, driven in part by an increase in surgeries and clinic visits. That was up from $1.62 billion for the year-earlier period. The system nonetheless incurred an operating loss of $53 million for the six-month period.

As of late December, the system had about 300 temporary contract workers, down from about 700 a year earlier, and a whopping 1,300 in late 2021, according to the latest filing. As of December, the system was spending about $2.5 million a month on contract workers, compared to a record brief peak of about $35 million a month two years earlier. By dropping contract workers and focusing on retaining permanent staff, the system cut its wages and contract labor costs for the most recent six months to $873 million, down from $887 million for the same period a year earlier, the filing said.

The system’s big cash and investment portfolio – at the end of December it totaled $2 billion – was a bright spot. Investment income and gains in value totaled $83 million for the six-month period, sharply up from the $10 million gain in the  year-earlier period.

One of the system’s prominent money-saving moves last year was to largely shutter the University District campus in Eugene. The facility, with an emergency room, rehabilitation center and inpatient behavioral health unit, chronically cost far more to run than it brought in in revenues. Despite loud protests from the community and nurses, PeaceHealth shut the emergency room and transferred most other functions to PeaceHealth’s big profit center: the RiverBend campus in Springfield.

“PeaceHealth’s goal is to provide high-quality care for our communities long into the future, which requires a sound and sustainable financial footing,” spokesman Joseph Waltasi told The Lund Report.

Unions and community members protested PeaceHealth's move to close down it University District campus in Eugene last year. 


Bend-based St. Charles has rebounded to operating profitability after a deep plunge during COVID.

The four-hospital nonprofit system had a $49 million operating profit on operating revenue of $853 million for the nine months ended Sept. 30, the latest data available. The system also reported $19 million growth in its investment portfolio, boosting it to $660 million.

That’s a big swing from an operating loss of $30 million and an investment portfolio drop of $123 million in the same period in 2022. Part of the portfolio slide came from St. Charles pulling out money to cover operating expenses.

In February, the Moody’s bond rating service rewarded St. Charles with a small ratings bump, to A2 stable from A2 negative. Moody’s cited the system’s “successful execution of turnaround plans.” The S&P ratings service upped its rating a notch, to “A stable” from “A negative,” and cited the system’s “meaningful rebound in operating performance.”

Spokesperson Alandra Johnson said the recovery stemmed from a variety of factors: Increasing patient volumes in the system’s cancer center and operating rooms; completing negotiations with insurers on reimbursement rates; hiring and retaining more permanent staff; and cutting temporary labor.

But last year, the system inked new labor contracts with workers represented by the Oregon Nurses Association that will add sizable costs over the next few years. The new three-year contract signed for registered nurses at the main Bend hospital provided an immediate $5 per hour across the board pay increase, plus three years of 4% per year raises, along with annual seniority-based step increases of about 3% a year.


The three-hospital system based in Medford has boosted its revenues, including with more surgery visits, but it is still falling short of reaching operational break-even point.

For the 12 months ended Sept. 30, the system reported an operating loss of $32 million on operating revenues of $1.2 billion. That’s an improvement on the operating loss of $61 million in the year-earlier period.

The red ink continued into the most recent quarter, ended Dec. 31, when it reported an operating loss of $15 million on operating revenues of $325 million.

Like other systems, Asante has cut back on expensive contract labor but is paying more to its permanent unionized staff. For the quarter ended Dec. 31, salaries and benefits rose 12%, to $199 million, from the year-earlier period “due to an increase in unionized staff and pay rates,” Asante reported.

The investment market was kind: The system reported $93 million in investment gains – both income and increases in value -- in the 12 months ended Sept. 30, and a further $57 million in gains through Dec. 31, the filings said.

The Fitch bond rating service was critical of Asante’s continued operating losses, and in December kept its rating at A+ with a “negative” outlook. Fitch forecast that once the new 324,000-square-foot Asante Medford hospital pavilion is fully operational – it opened in February – Asante’s finances will stabilize and the system may reach operating breakeven by 2025.


The dominant hospital system in the Marion County, nonprofit Salem Health hit a milestone in its recovery from the pandemic, reaching operational break-even in the six months ended Dec. 31, the latest filings show. It had a loss of just $490,000, on operating revenues of $581 million. On top of that, its investment portfolio generated growth and income of $52 million in the six-month period.

That’s a noticeable operational improvement. In the 12 months ended June 2022, the system had a $14 million operating loss, followed by an operating loss of $23 million in the 12 months ended June 2023.

The dominant hospital system in the Marion County, nonprofit Salem Health hit a milestone in its recovery from the pandemic, reaching operational break-even in the six months ended Dec. 31, the latest filings show. It had a loss of just $490,000, on operating revenues of $581 million. On top of that, its investment portfolio generated growth and income of $52 million in the six-month period.

That’s a noticeable operational improvement. In the 12 months ended June 2022, the system had a $14 million operating loss, followed by an operating loss of $23 million in the 12 months ended June 2023.

 You can reach Christian Wihtol at [email protected].