(The Center Square) – Washington state’s largest public hospital could see its operating margin drop despite a successful fiscal year 2025, with the anticipated loss of Medicaid direct payments. Harborview’s fiscal year 2025 was July 1, 2024, through June 30, 2025.
On Tuesday, Harborview Medical Center CEO Sommer Kleweno Walley briefed the King County Committee of the Whole about the impacts of the Trump administration’s One Big Beautiful Bill Act. That includes pressure on the hospital’s operating margins, as federal Medicaid direct payments and one-time state appropriations make up a significant portion of Harborview’s funding.
Harborview Medical Center is owned by King County and is the only Level 1 trauma center in the state. The facility also serves trauma patients from Alaska, Idaho, Montana and Wyoming.
In fiscal year 2025, Harborview was at an 8.3% operating margin as of May. The operational efficiencies have led to a carryover of $100 million into the 2026 fiscal year.
Without directed payments and non-reoccurring state appropriations, the 2025 fiscal year operating margin would have dropped down to -0.9%.
“So despite all of the incredible work we did as staff providers and leadership, without those Medicaid direct payments, we would not be in the black right now,” Kleweno Walley said.
Washington state is planning to spend $42 billion on Medicaid in the 2025-27 biennium, with $26 billion coming from the federal government.
The Washington State Republican Party did not respond to The Center Square’s request for comment at the time of this publication. However, The Center Square recently reported on industry analysts warning that Washington taxpayers can expect to hear calls for more taxes to cover lost funding.
Experts say people who are traditional Medicaid recipients are not in danger of losing coverage, but that the Medicaid program is in need of reform.
“You had these inflated numbers of people who didn’t even need care,” Washington Policy Center Healthcare Center Director Elizabeth New told The Center Square. “That added hundreds of thousands of able-bodied adults to the Medicaid rolls.”
Despite a strong budget performance in the current fiscal year, Harborview Medical Center has 106.2 days of cash on hand as of May 31. Typically, a stable medical center of similar size seeks a benchmark of around 150-200 days or more. Kleweno Walley blames growing costs, pending changes in Medicaid reimbursement, and ongoing capital needs, such as new inpatient floors and operating rooms.
Harborview’s uninsured rate was 12% before the Affordable Care Act was enacted in 2010. It now hovers around 3%. That is expected to change as part of the One Big Beautiful Bill Act, which restricts eligibility for certain non-citizens and imposes new work requirements.
Kleweno Walley said Medicaid cuts will result in more people losing insurance. According to a presentation, for every 1% shift in patients from Medicaid to uninsured, Harborview Medical Center will lose approximately $8.4 million per year.
There’s also the direct payment repeal. Starting in 2028, the One Big Beautiful Bill Act will reduce Harborview’s direct payments by 10% per year until the coverage for that is at Medicare levels, which Kleweno Walley said is “woefully short.”
“Basically [the $224 million in direct payments] we received this past year that helped with that strong [8.3%] margin will slowly be repealed back to Medicare reimbursement levels,” Kleweno Walley said.
While Harborview warns of anticipated cuts, federal officials have pointed to ballooning costs and inefficiencies in the Medicaid system. In 2024, roughly 1.2 million people were enrolled in Medicaid or CHIP across multiple states, and another 1.6 million people were enrolled in both Medicaid and subsidized Affordable Care Act exchange plans; errors that cost the federal government an estimated $14 billion annually.
For now, Harborview is stuck in between a state budget that can’t stretch and a federal program trying to tighten up after years of loose accounting.
