Marketing to Your Customers Washington State Hospitals Face Reduction in Services or Closings

Courthouse Journal
Washington State Association of Counties & Washington Association
of County Officials
December 15, 2000, Number 33

A report by the Washington State Hospital Association (WSHA), “Washington Hospitals Facing Financial Crisis,” ( 1,910kb) states that hospitals across the state are losing money and it could get worse. Richard Peterson, chair of the Washington State Hospital Association Board of Directors stated that “In the past two years more than one-third of the state’s hospitals operated in the red. It’s simple math -- costs continue to rise but reimbursements have not kept pace.”

The report said that Washington hospitals, on average, operate on a margin of 2.07 percent (the difference between revenues and expenses). A four to five percent operating margin is considered a sign of solid financial health. The majority of hospitals in Washington are not for-profit so what they may make above expenses in reinvested back into their facilities -- upgrading equipment and improving patient care. “There are a lot of new things that hospitals are expected to be doing, and a lot of them don’t have the money,” said Cassie Sauer, WSHA spokeswoman.

The situation for Washington hospitals mirrors what is happening nationally. Hospitals are not able to collect the full amount they bill. About one third of the average hospital’s revenue comes from Medicare, but that revenue has been steadily declining. Washington hospitals are expected to lose $1.3 billion in Medicare revenue from 1998 to 2004. Harborview is expected to lose almost $60 million during that period.

The University of Washington Health Policy Analysis Program estimates that spending on health care will need to be increased by $1 billion over the next two years just to maintain current services.

The WSHA report says that hospitals are seeing decreasing revenues at the same time they are seeing increasing costs due to increased cost of drugs, new technology, higher labor costs, an increasingly sicker population and new government regulations. The report further states that Washington hospitals do a good job of keeping expenses down, ranking ninth lowest in the nation in hospital expenses per capita. Unless hospitals can bring in more money, the report says, many will have to cut services or shut down in the next several years. This will especially affect patients in rural areas where health care choices are already limited.