This spring, hospitals and health systems in the Northwest are reporting some of their biggest financial losses since the COVID-19 pandemic started. In some cases, the need to pay back loans granted by the federal government early in the pandemic is contributing to their fiscal woes.
Providence Health Services, based in Renton, Washington, lost $510 million in the first quarter of 2022. Oregon Health & Science University, based in Portland, has lost $64 million in the current fiscal year, including a $20 million loss in the month of February alone.
And the St. Charles Health System, in Bend, lost $21.8 million and announced layoffs.
All three health systems have cited the impact of the omicron wave, inflation and the health care labor crisis as reasons for losing money on their operations.
Most hospitals have drawn on pandemic aid dollars, from the CARES Act and other sources, to partially offset those losses.
But a lesser known aid program, the Medicare Accelerated and Advance Payments program, offered short-term interest-free loans, not grants. And now, the bills are coming due at a time when hospitals’ costs are rising quickly and revenue from patient stays and surgeries is growing more slowly.
At the outset of the pandemic two years ago, Oregon hospitals and primary care providers received more than $1.1 billion in advance payments from Medicare, according to records shared by the Oregon Association of Hospitals and Health Systems. The idea was to keep the cash flowing in the early crisis months of the pandemic, when elective surgeries were canceled, by paying hospitals in advance for services they would provide to Medicare patients in the future.
The program has been used in the past to support hospitals impacted by wildfires and hurricanes. The idea is that hospitals are able to pay back the advances once the crisis has passed and operations have returned to normal. But the pandemic has dragged on — and hospitals and health systems are still dealing with the effects. At the same time, the federal government wants to get its money back so it can keep Medicare funded.
Based on the number of Medicare patients they treat, PeaceHealth (headquartered in Vancouver, Washington), OHSU and the St. Charles Health System got the biggest advances of the systems in Oregon that took loans: $214 million, $137 million, and $94 million respectively.
Congress set the repayment timeline and has extended it once already. Hospitals have lobbied, unsuccessfully, for the loans to be forgiven.
Federal attempts to recoup loans
Last March, a year after the first payments went out, the U.S. Department of Health and Human Services, which oversees Medicare, began recovering those cash advances by paying health systems 25% less for Medicare reimbursement claims. Earlier this year, following the schedule set by Congress, they began paying just 50% of the bill for any service the hospital provided to a patient covered by Medicare.
Hospitals can also opt to repay Medicare for the loans directly to avoid having their reimbursements reduced.
The Lake Health District, in remote Lake County, Oregon, received about $5.2 million in grants from the Provider Relief Fund, and a $7 million loan from the Accelerated and Advance Payments, which it is now paying back.
CEO Charlie Tveit says Lake Health District is repaying Medicare even as he is considering layoffs or cuts to services, including a long-term care facility and small hospice program.
“We’re looking at that. We can’t continue to lose money like we have been,” he said.
Tveit says the high cost of hiring temporary employees through an agency, for critical positions Lake Health has been unable to fill, is the primary driver of the losses. Most hospital systems are short on nurses and have been paying high wages for certified nurses to travel to their hospital for short stints. But, as Lake Health and others have found, that can get expensive quickly.
Lake District didn’t spend the advanced payments it received from Medicare, since it seemed likely the loan would need to be repaid. Still, Tveit said it’s frustrating to be returning federal aid — particularly when he can’t predict how COVID-19 might impact his future operations.
“We have no idea what’s going to happen this fall,” Tveit said. “It might come back with a vengeance.”