St. Charles Health System closed the books for the first six months of 2024 with a 1.4% operating margin, which was lower than the same period the year before, but still in the black.

Despite the decline in operating margins January through June, the health system’s revenue increased 8% to $601 million in the first six months of the year, compared to $556.3 million in the same period the year before. The health system attributed the revenue growth to reduced patient stay lengths, revenue cycles and care model improvements.

At the same time, expenses at the health system grew 12%, according to publicly disclosed financial statements.

Still, fixed payments from Medicare and Medicaid are not keeping pace with costs of care, said Matt Swafford, St. Charles Health System chief financial officer.

“St. Charles is not immune to these pressures,” Swafford said. “The first half of 2024 shows our expenses outpaced revenue growth. This is not a sustainable path over the long term.”

St. Charles is not the only health system to experience higher costs with lower revenues. Hospitals across Oregon are seeing costs rise faster than revenues, said Becky Hultberg of the Hospital Association of Oregon. Labor costs have risen dramatically as health systems work to retain and recruit from a shrinking pool of potential employees and not use traveling nurses.

St. Charles Prineville to halt planned surgeries

St. Charles Prineville to halt planned surgeries

“As a result, hospitals are having to make tough choices about the services they can afford to offer,” Hultberg said. “More than three years of data tell us this is not a phase — it’s a hospital’s new reality.”

Lawmakers need to approve higher payments from Medicaid, used by 1 in 3 residents in Oregon, she said. In Central Oregon, the median private payment for a colonoscopy at St. Charles Bend was $3,011 in 2022, compared to Medicare which paid $1,168 for the same procedure, according to data provided by the Oregon Health Authority.

Contributing to the income decline were planned and unplanned repairs and upgrades to operating rooms, which affected the number of surgeries the health system performed in the first six months of the year. More than 12,300 surgical procedures were performed in the first six months of the year, compared to 11,920 in the same period the year before, according to financial statements.

Labor costs increased by 12.1% in the first six months of 2024 at St. Charles Health System, which operates facilities in Madras, Prineville, Bend and Redmond. The health system is the largest regional employer with more than 4,700 employees, according to the annual Economic Development for Central Oregon ranking.

“Expenses growing faster than revenue is an issue we are seeing persistently across health care,” Swafford said. “In general, we are finding more and more independent providers are having a hard time staying in business and are seeking to align with health systems. St. Charles met the call to help stabilize access to services in our community.”

St. Charles starts construction in Redmond

St. Charles starts construction in Redmond

Shifting resources across the health system and fine tuning operations have been the health system’s mode of operation post-COVID-19. In 2023, the hospital system halted routine surgical procedures at its 16-bed Prineville facility, shifting over to Bend, Madras and Redmond.

The health system announced earlier this year that it would build a cancer center in Redmond that would care for up to 300 patients a day in a 53,000-square-foot building on NW Kingwood Avenue and NW Canal Boulevard. The new center is designed to take the pressure off the smaller cancer center at St. Charles Bend while catering to patients in Prineville, Madras and Redmond, the health center has said.