PORT TOWNSEND — Jefferson Healthcare expects operating revenue to be $213 million next year, Tyler Freeman, the hospital’s chief financial officer, told the board.
Freeman presented the hospital’s proposed 2025 budget during a special meeting Wednesday.
“Overall, it continues to be a tight margin,” Freeman said at the meeting. “You would have expected if I started off the presentation with, ‘We are expecting gross revenue to be $50 million higher,’ that we would have a higher change in that position. Overall, not a bad place to be in and we think it’s a reasonable depiction of where we’re going to end 2025, based on what we know today.”
The board will host a public hearing before its adoption of the budget at a regularly scheduled meeting at 2 p.m. Wednesday. The meeting will be accessible by phone or video conference.
To listen to audio only of the meeting, call 509-598-2842. When prompted, enter Conference ID number: 975 178 013#. To find a video conference link, visit https://jeffersonhealthcare.org/hospital- commission/#1641341666989-d1224408-bff1.
Freeman said the total operating revenue is up $27 million from the hospital’s 2024 budget.
“Unfortunately, operating expenses are also rising by about $26 million,” he added.
The hospital is hoping to operate with a 2 to 6 percent margin; it has landed nearer to 2 percent in recent years, Freeman said. Though 2 percent represents $4.26 million, Freeman said it is a tight margin for the hospital.
“The top-line salary wages; $100 million is what we have in our budget for 2025, (with) employee benefits sitting at 22 percent of that,” Freeman said.
$215,000 is being paid into the community daily in salary expense, Freeman said. About 60 percent of Jefferson Healthcare’s total cost is labor, before factoring in contract labor. The hospital is aiming to fill its positions with staff rather than contract workers moving forward, Freeman added.
Increased budget for employees in the 2025 budget can be attributed in part to new full-time employees who will be hired with new services provided upon the opening of the hospital’s new building, scheduled to be completed next summer.
Supply expenses continue to climb for the hospital as well, making up about 20 percent of total operating expenses, Freeman said.
The hospital also will open a specialty pharmacy, which will contribute to increased supply expenses, along with bringing in new revenue, he said.
Jefferson Healthcare expects to receive 44 cents per dollar charged, Freeman said. CEO Mike Glenn added that 44 cents is down from 56 cents per dollar charged in 2010.
The discrepancy between money received and money charged is due in large part to the hospital’s payer mix.
Medicaid insurance pays a much lower rate for services than private insurance does, Freeman said.
Low levy rates
Jefferson Healthcare receives a low rate through property taxes when compared with the state average, Freeman said, adding it’s a point of pride for the hospital.
The hospital receives 5 cents for every $1,000 in assessed property value. The average assessed home value in Jefferson County is $400,000, Freeman said, meaning homeowners pay about $21 per year toward the healthcare provider through property taxes.
“We do not get even one day’s worth of operation covered by our levy rate,” Freeman said. “What we do know is that the average hospital district in the state levies about 50 cents per $1,000.”
Some public hospitals have raised their levy rates up to 75 cents per $1,000 in assessed value, the highest lawful rate, Freeman said.
“There’s a lot of different reasons for this,” Freeman said. “One is, it is a tough industry. We have services we have to provide to our community that may not make financial sense. Places are using their tax revenue in order to account for things such as uncompensated care. We have a financial assistance and charity care policy that’s more generous than what the state requires of us, and that costs something. We have a softer collections policy than most other hospitals.”
Uncompensated care alone accounts for $10 million in the 2025 proposed budget, along with $5 million for charity care, Freeman said.
He added that some departments provide necessary services that the hospital must provide to the community but which do not make financial sense.
Freeman offered the example of obstetrics. He said obstetrics clinics across the country with fewer than 200 births annually are closing; Jefferson Healthcare sees 88 births per year.
Freeman said the clinic has cost the hospital in the range of $1 million, which ends up being paid out of operations.
“That’s obviously something that we do not have a margin on, but we need to provide to this community,” he said.
Many public hospital districts use their tax revenue to support those departments, Freeman said.
“In a perfect world, we wouldn’t pass on any rate increase because we know the issue of healthcare affordability,” Glenn said. “Hospitals are more inflation takers than inflation makers. When you’re in a high-inflation environment, like we have been the last couple of years, it provides all kinds of pressure on hospitals. Because patients see the hospital price increase and they get the bill from the hospital, they have no way of knowing that the real responsible actors are all of the goods and services, and, frankly, labor that we are purchasing.”
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Reporter Elijah Sussman can be reached by email at elijah.sussman@sequimgazette.com.
