Office Visit: Oklahoma hospitals face savings squeeze

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Timothy Pehrson

Across Oklahoma, when patients need care, they know to trust their community not-for-profit hospitals. Unlike for-profit companies, not-for-profit hospitals do not have shareholders and do not exist to earn a profit for their owners. Instead, not-for-profit hospitals are mission-driven to improve the health of the communities they serve, acting as forever organizations. For example, Integris Health and St. Anthony hospitals have been in the community for more than 100 years, providing care to Oklahomans in their greatest times of need.

While not-for-profit hospitals do not exist to make a profit, the expense of running a hospital, employing highly skilled health professionals, and investing in cutting-edge medicine and technology is steep and has been growing at an alarming rate. Most not-for-profit hospitals seek to make a small operating margin that can be used to reinvest in their community, upgrade and expand the services they offer to their patients, and save to guard against future downturns. However, the increasing cost of operating a health system means few hospitals have been able to meet this goal for several years.

Even before the pandemic, many hospitals in our state were struggling. In 2019, 40% of Oklahoma hospitals had a negative operating margin. However, the pandemic caused expenses to skyrocket and revenues to drop dramatically, a worst-case scenario for even the most efficient and prepared hospitals. Even with federal support in early phases of the pandemic, hospital finances began to deteriorate in 2020.

In the third wave of the COVID-19 pandemic during the winter of 2021-2022 – which saw more Oklahomans hospitalized than any previous wave – federal support to hospitals had run out. In 2022, total expenses for hospitals were $1.7 billion higher than in 2019, and 67% of Oklahoma hospitals had a negative operating margin.

As I mentioned, hospital operators prepare for the possibility of economic downturns or unexpected expenses by building cash reserves. However, multiple years of significantly increasing expenses, coupled with irregular revenues, has caused many hospitals to rely on their cash reserves to continue offering the services their communities need and expect. Many hospitals across the state are beginning to deplete their savings, jeopardizing their ability to continue being forever organizations.

Hospitals are focused on reducing expenses and working with insurance partners to negotiate payment agreements to ensure long-term sustainability. Additionally, the implementation of Medicaid managed care in 2024 will strengthen hospitals across Oklahoma. However, the next few years will continue to be very challenging for hospitals across Oklahoma and the United States.

Hospital leaders are reaching out to partner with health plans and policymakers. We must work together to ensure our communities have financially stable hospitals to continue providing the lifesaving care Oklahomans deserve and expect.

Timothy Pehrson is president and CEO of Integris Health.


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