Missed opportunity to invest in nurses at Seattle Children’s

CARES Act government relief helped hospital increase profits and build assets.

Child financial report copy

The pandemic took a huge toll on many hospitals. They needed to postpone lucrative surgical procedures, pay increased supply costs, and due to nurse burnout, pay large travel RN contracts.

But wealthy hospitals, like Seattle Children’s, still fared quite well, especially in 2021.

Seattle Children’s Hospital received $80 million in federal relief under the Coronavirus AID, Relief, and Economic Security Act, also known as the CARES Act. This infusion of cash helped the hospital realize profits of $108M in 2020 and $359M in 2021 (fiscal years ending September 30) according to the hospital’s financial statements.

It’s unclear exactly how this money was spent but a new report (available at the end of the article) by the Washington State Nurses Association (WSNA) states that this taxpayer money should have been have invested to retain the hospital’s nurses, the backbone of the hospital.

Nurses have spent over two years working in one of the most stressful and emotionally draining environments imaginable. In these two years, nurses at Seattle Children’s received just 3% in annual wage increases and, unlike other Seattle-area hospitals, did not receive a retention bonus. Meanwhile, annual inflation has been as high as 8.5%, and other Washington hospitals have investing in the retention of their nursing staff by giving double-digit raises.

The combination of burnout from the pandemic, understaffing, and more lucrative options has led to vacancy rates of up to 19% at the hospital, a figure that equates to approximately 400 registered nurses.

Yet, when Seattle Children’s received the CARES Act grants, instead of providing meaningful raises to nurses and other healthcare professionals, it increased its bottom line. A look at the numbers shows that the hospital would have been profitable in 2020 and 2021 without a single dollar from the CARES Act.

Seattle Children's Hospital CARES Act Metrics

Net Income (profit)$108 million$359 million
CARES Act Grants Received$64.2 million$15.5 million
Hypothetical net income w/out CARES$44 million$344 million
Hypothetical profit margin w/out CARES2.5%15.6%

The hospital would have done especially well in FY21, earning $344 million in net income with no CARES Act money. This amounts to a 15.6% profit margin.

CARES Act makes rich hospitals richer

The CARES Act was intended to stabilize the healthcare system at the outset of COVID-19. However, the grants to hospitals have been criticized in national publications like The Washington Post for their inequitable nature.

The method of distribution resulted in many financially successful, asset-rich hospitals receiving a disproportionate level of funding, and rural and/or poor urban hospitals receiving less than needed to provide adequate patient care.

The WSNA report concludes that Seattle Children’s Hospital did not need this federal bailout.

Seattle Children’s Hospital is one of the wealthiest hospitals in Washington. The hospital has $4.3 billion in net assets and 399 days cash on hand (as of end of FY21), meaning the hospital has enough liquid assets to operate its hospital and clinics for 399 days normally, even if it earned no additional revenue. This level of wealth gives the hospital enough cushion to withstand a difficult financial quarter, six month, or full year and still provide the same level of patient care. As stated above, real financial hardship was never the reality for Seattle Children’s as the hospital would have been profitable in 2020 and 2021 even without CARES Act money.

The report finds that during the two years that Children’s received these grants, it increased its wealth substantially with its net assets increasing from $3.6 billion to $4.3 billion. This expansion of wealth is expressed in greater value of the hospital’s financial investment portfolio and more property and buildings.

The federal relief gave the hospital flexibility to increase its expenses—in the form of wages and benefits to nurses and hospital staff— and still maintain profitability. But instead of making a meaningful investment in the people who provide care to children, SCH prioritized profits and asset expansion.

Compliance with CARES conditions

The CARES Act grants came with certain conditions. One condition is that the payment “will be used only to prevent, prepare for, or respond to the coronavirus and will be used only for health care expenses or lost revenue attributable to the virus.”

The Washington State Nurses Association has a pending Freedom of Information Act request into Health and Human Services (the entity responsible for allocating the CARES Act grants) for Seattle Children’s report on use of funds.

In all likelihood, Seattle Children’s use of funds is compliant with this broad requirement. Compliance with these conditions does not mean that Seattle Children’s did not use the CARES Act funds to increase its own wealth, however. The funds were permitted to be used on operating expenses, which increased profits and generated cash flow that could be invested in organizational priorities less directly related to patient care than nursing, such as hospital development, executive compensation, and financial investments.

See our report more details on Seattle Children’s financials and inequitable issues with the CARES ACT.

Read the full report