St. Charles Health System’s operating income gets back into the black, but Oregon hospitals still face big challenges

LAKE OSWEGO, Ore. (KTVZ) – Oregon hospitals’ second-quarter median operating margin was positive for the first time in five quarters, as echoed in a 2023 turnaround for St. Charles Health System, but is "still well below a healthy level, underscoring the potential fragility of hospital services," the Hospital Association of Oregon said this week.

A new report released by Apprise Health Insights shows Oregon hospitals reported a collective median operating margin of 1% and a median total margin of 2.6%, which includes investment income.

"Both numbers remain below pre-pandemic levels and reflect the ongoing challenges hospitals face as their operating expenses continue to outpace their revenue from core patient care activities," the hospital association said.

“Too many hospitals are forced to dip into their savings and find other ways to pay their bills,” said association President and CEO Becky Hultberg. “We have to go back 2 1/2 years to find a time when hospitals brought in enough operating revenue to cover the cost of patient care.” 

Nearly half of Oregon’s hospitals, or 43%, continued to post a negative operating margin in the second quarter of this year.  

As for St. Charles, for the six months that ended June 30, the hospital system reported an operating income of $27.6 million, compared to a loss of $43.3 million for the six months that ended June 30, 2022.

Chief Financial Officer Matt Swafford noted that St. Charles is among the more than 50% of hospitals around the state that posted a positive operating margin in the second quarter.

"The health system’s financial turnaround cannot be attributed to one thing - it’s been a systematic approach that is the result of a lot of hard work by many people," Swafford said in a statement to NewsChannel 21. 

"Hospital systems across the state and nation continue to struggle," he said, "and we remain concerned about the stability of the health care industry as a whole."

"Having a positive operating margin is critical, as St. Charles is looking to reinvest in our facilities and make infrastructure repairs and improvements that we fell behind on when our efforts were focused on the global pandemic response," Swafford added.

Statewide, the hospital association said, "Hospitals are experiencing the increasing pressure of an inflationary environment. Their operating expenses continued to rise in the second quarter, with employee costs (which make up half of total operating expenses) increasing 31% from the second quarter of 2020. Spending on supplies has also increased sharply, by 52%." 

At the same time, they said, operating expenses have increased, revenue from core patient activities has not kept pace. In the second quarter, Oregon hospitals spent $166 million more than they made.   

“I remain concerned about these financial stressors, which jeopardize the ability of hospitals to care for patients in the communities they serve,” Hultberg said. “We have already seen several hospitals make the wrenching decision to reduce services, and I worry that more are on the way.”    

Hultberg also said Oregon hospitals still face a significant health care workforce shortage that negatively impacts patient care. Although hospitals collaborated with labor groups to support a package of bills to support and rebuild the health care workforce in the 2023 legislative session, the hospital association said "more work is needed to ensure the stability of hospitals, so that they can care for the communities they serve."   

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About the Hospital Association of Oregon
Founded in 1934, the Hospital Association of Oregon is a mission-driven, nonprofit trade
association representing Oregon’s 62 hospitals. Together, hospitals are the sixth largest private
employer statewide, employing more than 70,000 employees.

Committed to fostering a stronger, safer Oregon with equitable access to excellent health care,
the hospital association provides services to Oregon’s hospitals ensuring all are able to deliver
dependable, comprehensive health care to their communities; educates government officials
and the public on the state’s health landscape; and works collaboratively with policymakers,
community organizations, and the health care community to build consensus on and advance
smart health care policy benefiting the state’s 4 million residents.