Hospitals warn Senate Democrats’ recommended cuts would gut their bottom line

The roughly $100M annual cut comes just two years after a bailout for hospitals. Plus some recommended listening

A reminder that The Observer is gathering the movers and shakers in Olympia on Thursday, April 3 at The Heritage Room starting at 6 p.m. for a get-together involving tasty snacks, beverages—adult and otherwise—and, of course, a spicy debate on the budget and revenue situation. There’s still some space left if you haven’t signed up.

Senate Democrats proposed changes to statute via the state operating budget to reduce state spending on health care and control some of the out-of-control healthcare costs plaguing patients. Opponents say those cost savings would come at the expense of the financial health of Washington hospitals, which operate on narrow, oftentimes negative, profit margins. One of the biggest concerns among hospitals centers around data of murky origins being used to justify the cuts, which they say paints a falsely positive picture of current hospital finances in Washington.

Senate Bill 5083 from Senate Ways & Means Committee Chair June Robinson would save the state money by requiring hospitals to implement reference-based pricing—where a maximum reimbursement is set for health insurers instead of individual negotiations—for commercial insurance carriers for public and school district employee benefits. The policy would cap hospital payments for these insurers at 200% of the Medicare reimbursement rate, though a handful of independent critical access and rural hospitals are excluded from the policy. The state has some leverage over these commercial health plans because the state Health Care Authority pays the insurers. The policy would require hospitals to accept a lower reimbursement rate for services provided to patients with these plans after receiving a “good faith” offer from insurance carriers.

Republican lawmakers spoke out against the cuts. The ranking member on the Senate Health and Long-term Care Committee, Ron Muzzall, R-Oak Harbor, argued that the state is acting like a monopoly by mandating hospitals contract with the relevant insurers.

During a House Appropriation Committee meeting Monday, Rep. Joe Schmick, R-Colfax, cautioned against the state applying reference-based pricing to such a broad swath of the commercial health insurance market, warning hospitals would be forced to increase costs on other commercial insurers or cut services. Opponents warned the policy could lead to more financially distressed hospitals and more hospital mergers—a problem Democrats have tried to regulate since 2023.

House Democrats voted SB 5083 out of committee, despite the opposition of the Washington State Hospital Association, individual hospitals, and other healthcare stakeholders that continuously denounced the policy’s underlying premise—that hospitals can afford to absorb more than $100M in cuts each year.

Photo by National Cancer Institute on Unsplash