St. Charles Health System continues to sustain financial losses

Sustained losses like this will negatively affect its credit rating with global credit analysts Moodys and Standard & Poor’s.

But hospital system officials say no layoffs or changes to service are expected at this time. In fact it has plans to boost its standards of care.

The lion’s share of the health system’s losses, $95.8 million, were from investments, according to the second quarter filings. In addition, the health system’s cash on hand dropped to its lowest point in six years from 297 days worth to 235.

The Central Oregon health system is not the only Oregon hospital to post poor financials in the second quarter, according to the Oregon Association of Hospitals and Health Systems. A total of 65% of the Oregon hospitals posted negative operating margins for the second quarter, ending in June. What’s more, many Oregon hospitals posted higher expenses than revenues over the past seven quarters.

“In the 22 years I’ve covered this (health) sector, the first two quarters of the year are the worst I’ve seen,” said Brad Spielman, Moody’s vice president and senior credit officer. “The Pacific Northwest is one of the regions impacted significantly by labor shortages. We think the sector will straighten itself our over time.”

If the losses continue, patients could see closures of some community-based services that would require them to drive farther to get the medical help they need or have to wait longer to get an appointment, said Lisa Goodman, St. Charles Health System spokeswoman.

At the moment, no changes have been made or planned, Goodman said.

“It will take time to get the business back,” said Matt Swafford, St. Charles Health System chief financial officer.

“The thing we have to focus on is to do the things we can do: Recruit nurses, reduce the cost of doing business by focusing on efficiencies and other back office areas so they are running more efficiently and automate where ever it makes sense.

“It’s not about getting rid of people, it’s about using resources more efficiently.”

Statewide, hospital systems in Oregon have lost $215 million from operations, according to the Oregon Association of Hospitals and Health Systems.

“This dismal financial picture calls into question the ability of some hospitals to provide essential and life-saving care for patients in their communities now and in the future, “ said Becky Hultberg, association president and CEO.

The Central Oregon health system, is a key provider for the communities it serves. Since the beginning of the year, there have been 105 layoffs at the four hospitals operated by St. Charles, its CEO stepped down and an interim CEO was named.

The health system was also affected by the pandemic by increasing demand for labor, delaying or canceling profitable nonemergency surgeries and longer hospital stays because of difficulties discharging patients to other facilities, Swafford said.

Losing the revenue for those non-emergency surgeries have cut into health systems profit margins considerably. At St. Charles, which has a stake in the Cascade Surgicenter, the loss of surgical revenues has affected revenues. The number of surgeries at the health system are still below forecasts.

Part of the cause could be the growth in surgery centers and partnerships like the one forged by Bend Surgery Center, which now has the capacity to care for patients post surgery because it teamed up with Bend Transitional are and Summit Health.

The competition and the lower surgery volume also is occurring as inflation soared 8.6% in the second quarter, making goods like medicine and supplies costlier, said Swafford.

“This is a difficult time for hospitals in Oregon for many reasons, but the second quarter losses posted by St. Charles Health System are staggering and deeply concerning,” said former St. Charles board member Knute Buehler, who was also a state representative for Bend.

“There is substantial increased loss from operations compared to 2021 and even quarter one of this year.

“This means St. Charles delivery of patient care continues to be under substantial financial pressure. The current trajectory is clearly not sustainable without marked improvement.”

Last month, Moody’s, a global financial analyst, retained the rating for St. Charles, but changed the outlook from stable to negative if the financial losses continue to mount at the health system.

“The balance sheet has been a real strength and it’s still pretty good,” Spielman said. “That’s one of the reasons we were able to keep the rating. The fact that revenues are declining is a concern. We’re not downgrading yet because we want o give them a chance to show improvement.”

One key change for the hospital is to provide continuity of care and creating a system of accountability for caregivers throughout a patient’s stay in the hospital, Swafford said. At all the touch points along the patient journey, St. Charles plans to orient the assistance around the patient needs, he said.

“We plan to focus on the whole service line,” Swafford said. “There are many organizations that do this. It’s not a small change, but it’s an opportunity to engage the physicians in a way that’s important. We’re moving toward that structure.”