The Inland Northwest’s two largest health care providers—Providence and MultiCare Health System—both are projected to continue operating at losses in 2024, although representatives of each expect margins to improve.

“Across the industry, we knew this was a multiyear journey,” says Shelby Stokoe, CFO of Providence’s Inland Northwest region. “I don’t think we’re going to get quite to a positive margin in 2024, but we will continue to see improvement over 2023 performance.”

Factors including inflation, an industrywide labor shortage, and delays and denials in reimbursement have led to operating losses of $36 million, $32 million, and $65 million through the first three quarters of 2023, respectively, for the health system’s Inland Northwest region.

The increase in losses during the third quarter was due to unexpected labor costs and a decrease in the volumes of patients who were insured or able to pay for their procedures and stays in July and September, Stokoe says.

“I’m expecting a better fourth quarter, more similar to first and second quarter,” she says.

The $133 million in total operating losses through 2023’s first three quarters is up from $126 million in losses in the year-earlier period as costs continue to outpace revenue.

“Our operating costs in 2023 are about 7% higher than the same period in 2022,” Stokoe says. “But our payment rates are pretty much flat.”

The Inland Northwest region for Tacoma, Washington-based MultiCare also has faced significant financial challenges in 2023, says Alex Jackson, chief executive of the Inland Northwest region.

“We’re projecting an over $50 million operating loss in the Inland Northwest region in 2023,” Jackson says. “We have more losses in 2023 than 2022.”

The organization posted a loss of $32.6 million in 2022, the Journal previously reported.

The increase in operating losses is a culmination of wage inflation, higher costs, payer denials, and placement challenges—getting patients who have met discharge criteria to the next, lower level of care efficiently.

Despite the financial struggles, Jackson says there have been some positive trends that he expects will continue into 2024.

“We’ve seen an increase in patients coming to see our Rockwood clinic provider,” Jackson says. “We’re up about 20,000 more patients this year over last year, by year-end.”

Demand also has been strong across MultiCare’s Indigo Urgent Care clinics, its emergency departments, and its surgery department, he says.

Perhaps the biggest reason for optimism for MultiCare and Providence is new legislation that will raise Medicaid reimbursement rates.

Beginning Jan. 1, Medicaid rates will cover about 80% of the costs for hospitals in Washington, which is closer to what Medicare pays, Stokoe previously told the Journal. Medicaid rates currently cover just under two-thirds of hospitals’ costs.

“The increase in Medicaid reimbursement will really help our revenue challenge as we move into 2024,” Jackson says.

The two health providers also have taken steps of their own to improve their margins.

At Providence, one focus has been on addressing the length of patients' stays. The long length-of-stay patients pose a significant cost for Providence, Stokoe says.

“We’ve seen an 8% reduction in our hospital length of stay,” Stokoe says. “Here in the Inland Northwest Washington service area, that’s translated to over $15 million in cost savings this year.”

Providence also has placed more focus on recruitment and retention of staff members as it attempts to address the ongoing labor shortage.

“We’re less reliant on expensive agency labor, like traveling nurses,” Stokoe says. “With that effort, we are saving about $1 million a month in the second half of 2023, as compared with the first half.”

MultiCare also has placed more emphasis on recruitment and retention efforts.

“That’s also helped us operationally and financially,” Jackson says. “It helped us reduce our reliance on costly travel nurses.”

The labor shortage will continue to present the biggest challenge in 2024, Stokoe says.

“We’re in a much better spot than we were a year ago, but we’re not full in all of our departments,” Stokoe says.

Providence’s Inland Northwest region includes Sacred Heart Medical Center & Children’s Hospital, Holy Family Hospital, and St. Luke’s Rehabilitation Medical Center.

MultiCare’s Inland Northwest region includes Deaconess Hospital, Valley Hospital, and Rockwood Clinic.