Washington hospitals brace for financial strain as Medicaid cuts could bring layoffs

What happened at Valley Medical Center (VMC) in Renton, mass staffing cuts, could be coming to a hospital near you, says Washington State Hospital Association CEO Cassie Sauer.

“If all the cuts we think are going into effect actually go into effect, there will be, absolutely be layoffs, and absolutely be loss of health care services in communities all around the state,” said Sauer during a virtual interview with KOMO News.

VMC confirmed the layoffs of 101 non-clinical employees, citing severe financial challenges due to recent funding cuts.

In an email to KOMO News, VMC described the cuts as ‘excruciatingly tough, but deemed necessary for “Valley’s viability,” citing federal and state changes that led to “rapid and unsustainable” financial impacts on the medical center.

VMC said its federal Medicaid reimbursements have not been renewed for 2025, an estimated annual loss of $80 to $100 million. The facility noted that despite the financial reduction, it does not expect the layoffs to impact patient care.

RELATED | Valley Medical Center lays off 101 non-union employees amid Medicaid funding cuts

“As a public district hospital, 64% of Valley’s reimbursement for care provided is from federal or state funding sources, so reductions disproportionately impact us,” said VMC.

Sauer said in addition to the unrenewed Medicaid reimbursements and proposed cuts in Medicaid, state budget proposals could also hurt some providers. Hospitals could be looking at a reduction in state aid annually under legislation SB 5083 being considered by Washington lawmakers.

“They want to make a major payment cut for the rates that for the payments to hospitals, for caring for teachers and state employees, that will absolutely affect hospital finances. And there’s proposals to put major new taxes on hospitals, which also takes money out of hospitals’ budget,” said Sauer.

And since the Pandemic, Sauer said the majority of the state’s hospitals continue to face operational losses.

“I really am talking about almost all the hospitals in the state. I think they’re in a they there are some that are in a more dire situation at this moment, that we think layoffs could happen soon.” Sauer said.

WE UW Medicine’s Medicaid reimbursement is on pause too, according to a UW Medicine Spokesperson: At this time, there are no plans for large-scale hospital layoffs at Harborview Medical Center or UW Medical Centers – Montlake and Northwest. We are also waiting for Medicaid reimbursements to be turned back on.

KOMO News reached out to Providence-Swedish too, who said they’d get back to us with their response.

ALSO SEE | Washington leaders unite against proposed Medicaid cuts, warning of dire health impacts

During public testimony before the Washington House Appropriations Committee on March 19, lawmakers heard arguments on both sides of SB 5083.

Supporters told House Appropriations Committee members that voting for the proposed legislation would help working families.

“Healthcare costs keep climbing and stretching family budgets to the limit. This bill offers a practical solution, reigning in excessive payments to hospitals, primary care, and mental health providers to keep costs in check without sacrificing quality care,” Nicole Gomez with the Washington Federation of State Employees told lawmakers earlier this month.

But Sauer insists if proposed cuts and increased costs are realized, the impact will likely mean a reduction in services, including labor and delivery and O.B. services, occupational therapy, physical therapy, and mental health services.

“I think the bigger issue is that people will have to wait longer for care, travel further for care, or not get care,” said Sauer.

KOMO News is waiting for a response from the Centers for Medicaid and Medicare Services.