Though Oregon hospitals’ second quarter median operating margin was positive for the first time in five quarters, it is still well below a healthy level, underscoring the potential fragility of hospital services.
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.
“Too many hospitals are forced to dip into their savings and find other ways to pay their bills,” said President and CEO Becky Hultberg. “We have to go back two-and-a-half 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.
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 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,” said Hultberg. “We have already seen several hospitals make the wrenching decision to reduce services, and I worry that more are on the way.”
Hultberg 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, more work is needed to ensure the stability of hospitals so that they can care for the communities they serve.