Rising costs, lagging reimbursement rates, and economic uncertainty are among the challenges facing Providence and MultiCare Health System, as Spokane’s two largest health care providers continue their multiyear, post-pandemic pursuits of positive profit margins.

For Providence, the financial wellbeing of its Inland Northwest service area is trending in a positive direction, despite continuing to operate at a loss.

The organization reported an operating loss of about $4.5 million in this year's first quarter, an improvement over the year-earlier quarter, when the service area posted an operating loss of about $19.7 million. The first-quarter figure is also an improvement over Providence’s fourth quarter 2024 operating loss of about $12.5 million.

Overall, Providence’s net loss in its Inland Northwest region mirrors the positive trend, coming in at a loss of $13.3 million in first-quarter 2025, an improvement over the year-earlier quarter’s loss of $29.7 million. The net loss factors in depreciation and amortization, interest expenses, and investment income, in addition to operating revenue and expenses.

MultiCare’s Inland Northwest region is still endeavoring to lower its operating losses.

“MultiCare in the Inland Northwest is operating at a loss in 2025 and unfortunately, our loss in 2025 is more than the operating loss we incurred in 2024,” says Alex Jackson, chief executive of MultiCare’s Inland Northwest region.

MultiCare reported a $35 million operating loss in its Inland Northwest region in this year's first quarter, he says.

Jackson didn’t disclose quarterly financial data for the previous year. The Journal previously reported that the health system had an operating loss of $50 million through the first 10 months of 2024.

Jackson notes, however, that funds from Washington state’s recently approved Hospital Directed Payment Program, also known as the Safety Net Assessment program, will retroactively offset some of the operating losses that have been incurred so far this year.

According to the Washington State Hospital Association, the program brings Medicaid reimbursement rates up to near Medicare rates, of 80% to 85% of the cost of care.

“Just here in the Inland Northwest, (the Safety Net Assessment program) has about a $39 million positive impact in calendar year 2025,” Jackson says. “Those (Safety Net Assessment program) funds will help us increase the reimbursement for the care that we’re providing to Medicaid patients.”

Justin Voelker, chief financial officer of Providence’s Inland Northwest region, echoes Jackson’s optimism about the approval of the Safety Net Assessment program, saying the program is an important part of how the state mitigates Medicaid shortfalls.

He says the way the program works is that hospitals pay a provider tax based on their historical Medicaid patient days. The state of Washington uses those taxes to increase the amount of state Medicaid funds, which increases the matching federal Medicaid funds.

“For Q1, what we booked was $22.2 million,” Voelker says, referring to the Safety Net Assessment program funds. “That’s the net impact.”

That means without the funds from the Safety Net Assessment program, Providence's Q1 net loss would have been $22.2 million greater.

Last year's first-quarter net impact from the program was about $17 million higher than this year, Voelker adds.

This year’s impact will be less, he says, because the state is taking some of that money for its general fund.

Among the factors contributing to Providence’s improvements is an increase in admissions, says Voelker.

“We’ve seen a lot more inpatient activity,” he says. “Our inpatient admissions are up approximately 9% in the first quarter of this year, versus ’24.”

Part of the admissions increase is due to a significant rise in visits to Providence’s emergency departments.

Providence’s Inland Northwest region averaged about 450 emergency department visits per day in the first quarter this year, up from an average of about 380 in first-quarter 2024.

“What we see generally is between 14% and 15% of our (emergency department) visits turn into admissions, and anywhere from 48% to 55% of our admissions come from the (emergency department).”

Voelker also attributes the positive trajectory to rate improvements.

“We have negotiated new managed-care contracts with some large payers, such as Premera,” he says. “Those went into effect in January. So that’s helped us in the rate side.”

Challenges persist for Providence, however, despite some of the positive trends.

“Across Providence, just in Washington state, we’re estimating $21.5 million in new costs that are coming from some of the legislative things,” Voelker says, referring to changes coming out of the most recent Washington state legislative session.

New increases to business and occupation tax rates, for example, will impact the organization’s financials.

“That’s one of the bigger ones that’s going to impact us, beginning in July,” he says.

Providence continues to deal with labor challenges.

“Just generally, there continues to be a scarcity of employees and physicians,” Voelker says.

Labor shortages create additional challenges, he says, when the service area is seeing a large increase in patients.

“We’re having to hire more temporary labor to care for those patients,” he says. “We have to have a lot of overtime.”

Roughly three-quarters of Providence’s payer classification in its Inland Northwest service area is government payers—Medicare, Medicare Advantage, or Medicaid. Because of this, Voelker says that revenue doesn’t keep up with expenses.

There are also concerns regarding the uncertainty around the often-changing tariff policy and supply chain issues, Voelker says.

Looking ahead, Voelker says Providence’s Inland Northwest region is hoping for a net loss of $26 million to $30 million for all of 2025. Then, the hope is the organization will break even by the end of 2026.

He notes, however, that uncertainties make it difficult to project future financial figures.

Some of Providence’s challenges are also felt by MultiCare, including issues with labor.

“Labor is how we spend about 60% to 65% of our dollars on a day-to-day, year-to-year basis,” Jackson says. “Our labor costs are increasing at a faster rate than inflation. They’re also increasing at a faster rate than the reimbursement for the care that we’re providing to patients.”

Like Providence, a majority of MultiCare’s patients have Medicare or Medicaid coverage.

“We love serving the community, but the cost often in serving a Medicare or Medicaid patient, our costs are often a little bit higher than the amount that we’re paid for caring for a Medicare or Medicaid patient,” Jackson explains.

MultiCare is also grappling with high pharmaceutical and supply costs, he adds.

Because of their reliance on Medicaid patients, both organizations are monitoring the Trump administration’s “One Big, Beautiful Bill” and the potential cuts to Medicaid that could come with it. The bill passed the House last month and is pending in the Senate.

“There’s some provisions in there that make us concerned for those 30% of adults in Spokane who rely on Medicaid,” Jackson says.

The bill could have a significant impact on health care systems.

“We provide a significant amount of Medicaid access here in the region, with our children’s hospital and some of our advanced tertiary care activities,” says Voelker. “We rely on Medicaid to a certain extent. It makes up 25% of our gross revenue for the service area.”

He says Providence would have to seek rate adjustments and potentially make other changes depending on the impact of the potential Medicaid cuts.

“We’d have to evaluate our services and see what we offer,” he says. “We’ve been here a long time. We need to make sure that we can continue to be here, and that’s really the challenge.”

He says potential cuts to Medicaid won’t force Providence to stop serving people, regardless of if they have a payer.

“We’re going to continue to extend financial assistance,” Voelker says.