Washington State Hospitals Face Fiscal Cliff Amid Budget Battles
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Washington State hospitals are bracing for significant financial challenges as lawmakers grapple with budget proposals that could drastically reduce funding for essential healthcare services. In late March 2024, amidst single-party control of the state government, the House and senate presented starkly different approaches to balancing the budget, leading to uncertainty for hospitals already struggling with rising costs. These proposed cuts and tax increases have raised serious concerns about the future of healthcare accessibility and quality throughout the state.
The crux of the issue lies in the interplay between the proposed tax packages and the effects of Senate Bill 5083 (SB 5083), which addresses public and school employee benefit payments.According to industry insiders, the convergence of these factors could leave hospitals in a precarious financial position.Cuts Averted… For Now:
Thanks to intense lobbying efforts by the Washington State Hospital Association (WSHA) and its member hospitals, several proposed cuts initially included in the governor’s budget were successfully excluded from both the House and Senate budget proposals.these averted cuts included:
A $75 million biennial cut (eventually phasing in to $100 million) to the Hospital Safety Net Assessment.
$116 million in biennial cuts (eventually phasing in to $156 million) to hospital facility fees.
More than $30-41 million in biennial cuts to professional fees.
Though, the relief might potentially be temporary. The debate surrounding other significant cuts and tax proposals remains heated.
House Budget: Deep Cuts and New Taxes
The House budget package introduces a series of significant cuts to hospital payments, coupled with a 1% increase to the Business and Occupation (B&O) tax on taxable revenue exceeding $250 million. This combination has raised alarm bells among hospital administrators,who fear the cumulative impact on their ability to provide care.
Key hospital-specific proposals from the House include:
A $56.2 million cut to hospital reimbursement from public and school employee benefit plans due to SB 5083. This cut could grow to over $341 million per biennium once fully implemented.
Elimination of reimbursement for hospital ancillary services (like labs and therapy) for Medicaid patients on administrative day stays, amounting to a $1.5 million General Fund State/ $5.0 million total reduction.Beyond hospitals, the House also proposed considerable cuts to other healthcare areas, including:
Reductions to Medicaid adult dental rates ($10.7 million GFS/ $38 million total).
Reductions to Medicaid children’s dental rates ($22.7 million GFS/ $46 million total).
Reductions in Medicaid laboratory fee schedules ($10.4 million GFS/ $33.5 million total).
A 1% reduction in Medicaid managed care organization capitation rates ($37.5 million GFS/ $124 million total).
Behavioral health services are also on the chopping block in the House proposal, with reduced funding for long-term civil commitment ($33.5 million) and children’s long-term inpatient beds ($4.7 million GFS/ $9.3 million total).
The House budget also includes significant increases to licensing fees for nursing homes ($16.7 million GFS), adult family homes ($23.1 million GFS), and assisted living facilities ($21.8 million GFS).
Senate Budget: Payroll Tax and Continued Cuts
The Senate budget proposes its own set of challenges for hospitals. While it includes the same $56.2 million cut tied to SB 5083, its core revenue proposal involves a 5% payroll tax on wages above the Social Security maximum. In 2025, that threshold is $176,100.
This payroll tax,according to industry analysts,would disproportionately affect hospitals due to their high concentration of specialized medical professionals.
Like the House, the Senate also includes:
A $10.4 million GFS/ $33.5 million total reduction in Medicaid laboratory fee schedule rates.
* A $29.7 million GFS/ $115.4 million total reduction in Medicaid managed care organization capitation rates.
The Senate also proposes a $42.6 million GFS/$47.4 million total reduction in funding for long-term civil commitment and a $3.9 million GFS/ $7.9 million total reduction in funding for children’s long-term inpatient beds. Licensing fees for long-term care facilities are also slated to double,with a $41.4 million GFS/total increase.WSHA’s Stance and Next Steps
The WSHA is actively engaged in advocating for the needs of its members. As of late March 2024, the organization was weighing in on various legislative efforts, including bills related to tribal membership on local boards of health (ESHB 1946), legal portrayal under the involuntary treatment act (E2SB 5745), hospital medical record retention (SSB 5239), hospital price transparency (SSB 5493), and access to mental health and substance use disorder services (E2SHB 1432), among others.
The legislative process was set to advance quickly in late March 2024, with hearings held on March 25 and committee votes scheduled for March 27, followed by floor votes in each chamber on March 29. A conference committee was slated to reconcile the differences between the House and Senate proposals,with a final budget needing to be enacted before the legislative session adjourned on April 27.
implications for Patients and Communities
These budget debates have far-reaching implications for patients and communities across washington State. Cuts to hospital funding could lead to reduced services, longer wait times, and potential closures of rural hospitals, exacerbating existing healthcare disparities. The proposed tax increases could further strain hospital finances, leading to tough decisions about staffing and investments in new technology.
The situation is notably concerning for vulnerable populations, including low-income individuals, children, and those with behavioral health needs. Reductions in Medicaid rates and dental services could limit access to essential care, while cuts to behavioral health programs could leave individuals without the support they need.
As Washington State lawmakers work to finalize the budget, hospitals and patient advocates are urging them to prioritize healthcare funding and ensure that all residents have access to high-quality, affordable care.
Real-World Example:
Consider a small, rural hospital in Eastern Washington. this hospital already operates on a tight budget and relies heavily on Medicaid reimbursements. If the proposed cuts to Medicaid rates are enacted, the hospital may be forced to reduce staff, eliminate certain services, or even close its doors altogether. This would leave residents in the surrounding communities with limited access to emergency care, specialized treatment, and preventative services, creating a healthcare desert.
Moving Forward:
the outcome of these budget negotiations will have a significant impact on the future of healthcare in Washington State. It is crucial for lawmakers to carefully consider the consequences of their decisions and prioritize the health and well-being of all residents. Balancing the budget is essential, but not at the expense of essential healthcare services that communities rely on.
interview: Washington State Hospitals Face Fiscal Cliff Amid Budget Battles
Archyde News welcomes Dr.Evelyn Reed, Chief Financial Officer at City General Hospital, to discuss the critical financial challenges facing hospitals in Washington State.
The Current Situation
Archyde news: Dr. Reed, thanks for joining us. Can you paint a picture of the financial landscape hospitals are navigating in Washington State right now?
Dr. Reed: Thank you for having me. The situation is quite precarious. We’re seeing importent budget proposals from both the House and Senate that could drastically impact our ability to serve patients. Rising costs and the uncertain effects of SB 5083 further complicate matters.
Budget Proposals: A Closer look
Archyde News: Could you elaborate on the specifics of these proposals? what key differences are you seeing between the House and Senate budgets?
Dr. Reed: Certainly. The House budget includes considerable cuts to hospital payments and a new B&O tax, wich will hit us hard. They are proposing cuts to reimbursement from school employees and public benefit plans due SB 5083. We will also see elimination of ancillary services for Medicaid patients. The Senate budget, on the other hand, introduces a 5% payroll tax on wages exceeding a certain threshold. The state senate is looking at making similar cuts to Medicaid and other services like civil commitments.
Potential impacts
Archyde News: What are the potential implications of these budget decisions for patients and communities across the state?
Dr. Reed: We foresee reduced services, longer wait times, and perhaps, the closure of rural hospitals. These decisions could exacerbate existing healthcare disparities, affecting particularly vulnerable populations.
What WSHA is Doing
Archyde News: We understand the Washington State Hospital Association (WSHA) is actively involved. Can you share their strategy and the upcoming steps?
Dr. Reed: Yes, the WSHA is lobbying intensely on behalf of its members. They are looking at different measures like tribal membership on boards, access to mental health, and openness. The fast-paced legislative process demands our constant attention to protect patient access to essential care.
Looking Ahead and solutions
Archyde News: What is the best-case scenario here, and what solutions is City General Hospital considering to navigate these challenges?
Dr. Reed: We are urging lawmakers to prioritize healthcare funding and to ensure that everyone has access to affordable, quality care. To withstand challenges, City General, much like other hospitals, is evaluating resource allocation, seeking operational efficiencies, and continuing to advocate. For us, it’s how we will fund and serve our hospitals and how we meet the needs of our staff and patients.
Archyde News: Dr. Reed, an important point. Do you believe that any of these immediate cuts could be detrimental to the long-term health of the state, even if they improve the state’s immediate financial situation?
dr. Reed: Absolutely. The long-term implications of cuts to Medicaid and other services cannot be overstated. The short-term gain of budget-balancing may come at the cost of a state-wide strain on health.
Archyde News: Thank you for your time and insights, Dr. Reed. It’s clear that Washington State hospitals face a critical juncture.
Dr. Reed: Thank you for having me.
Archyde News: We welcome your thoughts on these issues. What strategies do you think would best serve the patients and healthcare providers of Washington? Share your comments below.
