Between April and June this year, more than half of Oregon’s hospitals earned more than they spent providing care, according to a new quarterly report from the Hospital Association of Oregon.
Statewide, hospitals’ median operating margin was 1%.
That’s the first financial quarter since late 2021 that hospitals in Oregon as a group have not posted operating losses.
Operating margins do not reflect the income hospitals earn from their often substantial investment portfolios.
“Oregon hospitals have shown some signs of financial recovery, but the long term sustainability of hospitals remains in question,” said Becky Hultberg, president and CEO of the Hospital Association of Oregon. “The question is whether recovery will happen soon enough.”
Hultberg said a single quarter of data isn’t enough yet to establish if health systems finances have turned around, and more service cuts could be on the way.
In the past year, citing their operating losses, health systems have laid off staff and ended or attempted to end critical services, including a labor and delivery unit in Baker County and an emergency department in Eugene. In the Portland metro area, OHSU has announced plans to merge with the financially struggling Legacy Health.
Overall, in the second quarter of 2023, hospitals reported an increase in patient volumes which brought in more revenue. And while hospitals’ expenses continued to increase, they grew less quickly than in previous years. Payroll and benefits costs grew just 3% during the quarter.
Hospitals are paying much higher interest rates than they were a year ago, however, due to a decline in their bond and credit ratings. That’s increased the cost of borrowing to upgrade facilities and technology, according to the report.
Larger urban hospitals performed better than smaller rural ones. Oregon’s 27 hospitals that receive standard Medicare reimbursements, which include most Portland metro area hospitals and major regional hospitals, reported an operating margin of 2.5%, while rural hospitals as a group broke even and didn’t report any profit.
Hultberg said that reflects a return to pre-pandemic trends.
“One of the unique features of the last three years was the extent to which larger urban hospitals struggled financially,” she said.
Hospitals also saw the average length of patient stay drop from 5.41 days to 4.96 days.
Patient stays trended longer during the pandemic and its aftermath, due to the number of people with COVID, delays in care that resulted in sicker patients, and bed shortages in long-term care that left patients stuck in the hospital.
Longer stays also have contributed to hospital crowding and short staffing. That metric remains a little higher than it was pre-pandemic, Hultberg said.