BEND — If the financial picture doesn’t improve for St. Charles Health System, the region’s largest employer, it could affect the level and quality of patient care, according to the Oregon Association of Hospitals and Health Systems.

But global credit rating analyst Moody’s is bullish on the health system, giving it high marks that would enable it to borrow money at low rates, if needed. 

“It has a good rating,” said Brad Spielman, Moody’s vice president and senior creditor officer. “St. Charles’s weaker performance is consistent industrywide. St. Charles is far from failing. What’s happening at St. Charles is not out of line in what we’re seeing in many other health systems.”

The health system’s high rating is due, in part, to its 200 days’ worth of cash on hand and its solid portfolio that it can draw from. The high rating speaks to the health system’s strong balance sheet, Spielman said.

Like many health systems, months of limited surgeries during the early days of the pandemic hurt the bottom line, he said.

“A lot of what hospitals do is not profitable,” Spielman said. “While overall revenues have not declined, certain segments have impacted health systems disproportionately.”

As the only hospital system for eight counties, the four hospitals run by St. Charles play a vital role in the community. But it has been severely hampered by a labor shortage, the pandemic and a large percentage of patients who are on Medicare insurance, which reimburses hospitals at a lower rate than private insurance companies.

Since May, St. Charles Health System has taken steps to offset a $40 million loss in operational expenses. The hospital system laid off more than 100 people, including the chief physician executive. A month later, the CEO stepped down and took an advisory role.

Meanwhile, the physicians at St. Charles Medical Group took the unusual step Monday of filing a petition with the National Labor Relations Board to become a union. A union will enable the medical staff to bargain for a say in patient care, which is the staff’s chief concern.

“Are we facing some tough challenges? Yes,” said Dr. Steve Gordon, interim president and CEO of St. Charles Health System. “But we’re confidently moving forward on a path to stabilize our health system, preserve and strengthen our core services in the region and make sure our patients, physicians and employees have a good experience here — those are our top priorities for the organization.”

Gordon said the health center is not being courted by other health providers.

 “To put this rumor to rest: St. Charles is not for sale,” Gordon said in a prepared statement.

During the first three months of 2022, six in 10 Oregon hospitals lost money, said David Northfield, Oregon Association of Hospitals and Health Systems director of communication. Oregon hospitals recorded a $103 million loss in the first three months of the year, Northfield said.

“St. Charles is not alone in its financial struggles,” Northfield said. “The first three months of 2022 saw Oregon hospitals post their worst financial quarter of the pandemic. These dismal numbers come at a time when hospitals were full of patients.”

But those losses are following a decade of growth, said David Baden, Oregon Health Authority chief financial officer. 

“We don’t know yet if this is a temporary blip or a more permanent trend so that is not a situation we can predict,” Baden said. “Each hospital has its own financial situation.”

Healthcare is considered one of those expenses that is not discretionary, said Damon Runberg, Oregon Employment Department regional economist. Older patients tend to use these services at a much higher rate than younger people, he said. In Deschutes County, the number of people 65 and older will grow by nearly 30% by the end of the decade, he said.

“There is a strong demand for health services in Central Oregon and that demand will be increasing over the coming years as the region grows and ages,” said  Runberg. “The financial strain felt by the hospital is likely not a reflection of demand for health services, but patients delaying procedures or other operations due to the public health emergency.”

At the Central Oregon health system, more than half of its patients are on Medicare, which negotiates a fixed rate for healthcare services. Typically health systems have less than half of its patient mix on Medicare, Spielman said.  

“St. Charles has a more challenging payer mix than most,” Spielman said. “That higher mix makes it harder to make a profit. But the big picture is that they’re a highly rated organization that has head room to withstand operational pressures. “

During the first two years of the pandemic, the health system’s coffers were bolstered by federal relief. It received $63 million to offset operational losses incurred because of demand from COVID-19 care.

It also received $94 million from Medicare in an interest free loan that the hospital system must repay by September, said Matt Swafford, St. Charles Health system chief financial officer.

Just this week, the Federal Emergency Management Agency handed over $17.2 million in grant money that the hospital system applied for two years ago to offset losses. That is in addition to a $7 million grant from the Coronavirus Aid, Relief and Economic Security Act funding that came in this year. 

But still that’s not enough.

“We’re grateful to have it,” Swafford said.  “We have to support operations from payments from our balance sheet. “

At St. Charles’s four hospitals, labor costs rose 28%, or $75.1 million, in the first six months of the year, compared to the same period in 2021, Swafford said. 

The health system is still behind in the number of surgeries it performs from pre-pandemic times. During the early days of the pandemic, hospitals only performed emergency surgeries. Routine surgeries were delayed or canceled. Many of those surgeries, however, were either rescheduled or the patients had them done at surgery centers not operated by the hospital system, Swafford said. 

A group of physicians at St. Charles presented to the hospital’s medical governance board in November a plan that offered $17 million in improvements to patient care that could improve the bottom line, said Dr. Joshua Plank, a physician at St. Charles Medical Group. 

The plan included barcoding medication to reduce errors and improve patient safety, carving out more exam and procedure rooms from offices, and making staffing more flexible to move from under used areas to overwhelmed clinics, Plank said. 

“Nothing was done for five months when the financial crisis was just beginning and potentially avoidable,” Plank said.  “Things have started to move at a slow pace.”