Perfect storm engulfs St. Charles


Last updated 6/21/2022 at Noon

The recent closure of the lab at St. Charles Family Care Clinic in Sisters is just one symptom of a financial crisis engulfing St. Charles Health System.

The term is not an alarmist. When The Nugget met with Mike Richards, operations VP for St. Charles Medical Group, and Lisa Goodman, public information and government affairs officer for the parent organization, St. Charles Health System, they used the term “financial crisis” four times in the conversation. They made no effort to spin the difficulties in which the region’s sole hospital provider finds itself.

The meeting was prompted by St. Charles’ announcement to discontinue laboratory testing at the Sisters clinic. At the same time they and every hospital in the country are desperately trying to hire patient care workers, they are laying off some 100 nonmedical staff in a distressed attempt to shed costs.

Imagine you are a grocery store, and every dollar you took in your cost was $1.07. How long before they’d have to close the doors or layoff staff or reduce less profitable items? That’s the case at St. Charles, who have a minus 7.3 percent operating margin, according to Goodman.

“If you’re McDonald’s,” she said “and beef goes up, you raise the price of hamburgers. We have no way to raise prices (set by dictate or long-term contracts),” she said.

Nationwide, drug prices for hospitals are up 36.9 percent, supplies 20.6 percent, and labor 19.1 percent. It’s the latter that makes up more than half of a hospital’s expenses and they are unsustainable. It stems from the shortage of all workers but is most pronounced in frontline providers, primarily nurses and MAs (medical assistants).

U.S. health officials say they are short 100,000 nurses alone, enough to care for 1 million patients. Driving the growth in labor expenses has been an increased reliance on contract staff, especially traveling nurses, who are integral members of the clinical team. In 2019, hospitals spent a median of 4.7 percent of their total nurse labor expenses for contract travel nurses, which skyrocketed to a median of 38.6 percent in January 2022.

Contract staff agencies have increased the rates they bill hospitals significantly. In fact, hourly billing rates that hospitals pay staffing firms for contract employees increased 213 percent compared to pre-pandemic. It is not uncommon for traveling nurses, respiratory or physical therapists, to outearn doctors in general or family practice.

It was less than a month ago that Robin Meter from St. Charles participated in a panel discussion sponsored by The Nugget and Citizens4Community. He spoke in much more optimistic terms about the future of health care in a growing Sisters Country, and gave no hint of the hospital’s financial stress.

Richards said that St. Charles is still committed to increasing its services in Sisters, yet admitted that at this point it was only a goal and not a plan. When asked how long before they dug out of the hole, he answered, “Hopefully, by year end.” Goodman was more pessimistic, saying: “Probably not before the end of ’23, maybe early ’24. It took us two years to get here and will take at least that long to recover.”

COVID-19 meant the postponement for nearly two years of the hospital’s only true profitable source of revenue — elective surgeries such as joint replacements and outpatient procedures like colonoscopies that businesses like Bend Surgery Center, Summit Medical Group, and Mosaic Medical provide in multiple locations. The latter two are more of a competitor for talent than services.

Medicare and Medicaid provide 74.9 percent of St. Charles’ reimbursements and that does not begin to cover the true costs of services. Units of the federal government, Medicare and Medicaid tell the hospitals each year what they will cover and for what amount. There is no negotiating nor going back mid-year when something catastrophic like a pandemic occurs.

Prior to the pandemic, in 2019, the system had an operating profit margin of 4.1 percent, which declined to a negative margin of -1.4 percent in 2021 and is now at over 7 percent in the red. The four-hospital system — Bend, Redmond, Prineville, and Madras — has less than nine months of cash on hand.

They are repaying an even $1 million a week installment against a $94 million advance they received from CMS, the Centers for Medicare & Medicaid Services, provided to help hospitals through the pandemic.

COVID kept noninfected patients away from the hospital, largely by design. Emergency visits are usually profitable for a hospital. St. Charles saw the number of emergency visits decline from 94,496 in 2019 to 79,205 in 2020, the first and worst year of the pandemic. Outpatient cases dropped from 15,195 in ’19 to 12,206 in ’20 and recovered slightly in ’21 to 13,594.

Richards and Goodman are not optimistic that they will get back to the roughly 1,250 monthly outpatient case level, more than 10 percent lost, possibly forever, to other providers who also are short workers and bid up salaries.

Questioned if services like lab testing or radiology could be performed in Sisters on a job-sharing basis, Richards said: “If we had enough to share, possibly. There just aren’t enough workers to go around.”

Richards talked about how they are moving as quickly as possible to cross-train and uptrain staff to take on more patient care, with hopes that Sisters can benefit by such efforts to make the workforce nimbler.


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