Gov. Bob Ferguson Feb. 27 laid out additional spending cut recommendations for the 2025-2027 biennium. The proposed spending cuts are on top of the cuts already proposed in Gov. Inslee’s 2025-2027 budget released in December. WSHA is disappointed in Gov. Ferguson’s decision to include additional cuts to hospitals. In aggregate, Washington hospitals continue to experience negative operating margins.
The state is facing a $12-15 billion budget shortfall over the next four years. Last month, Gov. Ferguson asked all state agencies to go through an exercise of proposing 6% cuts to each agency’s budget. Thursday, Gov. Ferguson released his proposed budget cuts based on those agency recommendations. The proposed cuts amount to about $4 billion—or about half of the two-year deficit—in the 2025-2027 biennium.
This Inside Olympia focuses on the impacts to hospitals and health care, but the budget makes cuts in many state agencies. Overall, WSHA is disappointed with the outsized impact on health care compared to other funding areas, like education.
Major cuts to hospitals included in the recommendations are:
- Hospital Safety Net Assessment Program cut ($100 million total biennial impact to hospitals). (Contained in Gov. Inslee’s budget)
- Caps hospital payments under state and school employee health plans (PEBB/SEBB) – an impact of $57.8 million to hospitals in the last six months of 2025-2027 biennium (January – June 30, 2027). When fully implemented in state fiscal year 2030, the cut to hospitals is $370 million per biennium. (Contained in Gov. Inslee’s budget)
- Facility fee cut—$34 million-state/$116 million total funds reduction in outpatient facility charges at off-campus hospital-based clinics. The Governor’s Office has not yet released more detail about this proposed cut.
- A carve out of 340(b) retail pharmacy – changes payment for managed care retail pharmacy services from being paid by the managed care plan to being paid by the state, so the state keeps the savings. This would save the state $22.5 million-state/$61.5 million-total.
- Elimination of reimbursement for hospital ancillary services for patients on administrative day stays. While this is a smaller impact ($1.2 million-state/$4.6 million-total), it has a direct impact on hospitals.
There are also many millions of dollars in other cuts to programs that do not directly impact hospitals but collectively have a major impact on the problem of patients who are ready to discharge being stuck in hospitals. For example, many budget items WSHA has advocated for around the public guardianship program, long-term care rate enhancements, and youth crisis programs are eliminated under these new proposed cuts.
A summary table of the cuts most impactful to hospitals can be found here.
Budget next steps
The next revenue forecast comes out March 18. The House and Senate will develop their proposed budgets shortly after. Then, they will negotiate a final biennial budget, which is due before the legislature adjourns April 27. WSHA will continue to advocate against budget cuts that will be harmful to Washingtonians’ ability to access health care services.
