Oregon community hospitals struggle with low margins

In the second quarter of 2017, community hospitals across Oregon saw low operating margins compared those of prior years, continuing the trend from the previous several quarters, officials said Monday.

The median operating margin at an Oregon hospital was 2.3 percent in the second quarter of 2017 — significantly down from the 5.3 percent recorded for the same period in 2016.

“Oregon hospitals are continuing to face difficult financial decisions,” said Andy Davidson, president and CEO of the Oregon Association of Hospitals and Health Systems. “But hospitals remain committed to their staff, their patients, and the communities they serve as they navigate this troublesome period.”

While the number of self-pay patients has continued to remain stable at just under 2 percent, charity care totaled $99.8 million in the second quarter of 2017, up 9.3 percent from $91.3 million in Q1. This shows that despite increased coverage, hospitals are seeing increasing numbers of patients who lack the ability to pay because they are uninsured or have high deductible health plans.

Notably, outpatient visits continued to increase, and indeed the increase in this quarter was significantly higher than before, up by 4.5 percent from Q2 2016. Inpatient volumes remained stable. At the same time, emergency department visits decreased 1.5 percent as compared with the same quarter in 2016, with 336,624 total visits in the second quarter of 2017.

The continued low margins came before the implementation of a new legislatively mandated 0.7 percent tax on the largest hospitals to shore up the finances of the state’s Medicaid program. Hospitals are very concerned about the impact of this tax combined with other payment cuts passed by the Legislature this past session.

“While the uncertainty around health care at the national level seems to have leveled out, there is still considerable question about Oregon’s system and its long-term sustainability,” added Davidson. “Hospitals are devoted to a fully-funded, sustainable Medicaid system in Oregon, but the Legislature must consider the impact of taxes and cuts on hospitals’ ability to provide the care Oregon communities expect. Today’s report shows we must continue to watch closely to ensure they stay financially viable as core funders of the Medicaid program.”