FAQ

What are the major healthcare headwinds?

Hospitals across Oregon and the nation are facing an unprecedented structural and financial crisis. In Oregon alone, a majority of hospitals – including Sky Lakes – are now operating at breakeven or at a loss. The fundamental problem is straightforward: the cost of providing care continues to grow faster than the reimbursement hospitals receive for providing it. 

Labor and physician costs, employee benefits, pharmaceuticals, and medical supplies have increased significantly since 2020, driven by workforce shortages, an aging population with increasingly complex healthcare needs, and broad inflation. At the same time, reimbursement from Medicare and Medicaid has failed to keep pace with these rising costs. Hospitals are also experiencing increasing delays and denials from commercial insurers while absorbing millions of dollars in additional annual costs associated with new legislative and OHA requirements. 

Adding to these pressures is significant uncertainty surrounding the future impact of H.R. 1, the federal budget law enacted in 2025 that includes changes to Medicaid funding and coverage, and related federal healthcare funding changes. While the full financial impact on Oregon and Sky Lakes is not yet known, reductions or changes in federal Medicaid funding and coverage could further increase uncompensated care, place additional pressure on state Medicaid resources, and widen the already significant gap between the cost of providing care and what hospitals are paid. 

Together, these pressures have created an increasingly difficult financial environment for rural community health systems. And many of the potential federal impacts have not yet been fully realized. 

While society increasingly relies on hospitals as the catch-all safety net for healthcare and many other community needs, there is no comparable safety net for hospitals themselves. That is especially true for independent rural hospitals like Sky Lakes.

How is Sky Lakes doing?

We are projecting to end FY 2026 with an 8% operating loss, driven by increased operating costs, lower-than-expected patient volumes, and continued challenges obtaining appropriate reimbursement from payors for the care we provide to our community. 

The good news is that our balance sheet (think of it as Sky Lakes’ “savings account”) remains strong, and teams across the organization are executing numerous improvement initiatives designed to return Sky Lakes to stable operating margins over the next 24 months. 

What does an 8% operating loss mean, and how does that differ from having a strong balance sheet?

Operating margin measures whether the revenue Sky Lakes receives covers the cost of providing care and running our organization. An 8% operating loss means that for every $100 in operating revenue, we spend approximately $108.

Our balance sheet reflects the assets and financial resources Sky Lakes has accumulated over time, along with our financial obligations. Think of operating performance as the ability to cover household expenses with current income, while the balance sheet reflects savings, investments, property, and debt.

Sky Lakes’ strong balance sheet provides a financial cushion and resources for important investments in patient care. However, those resources cannot indefinitely make up for ongoing operating losses. Improving our operating margin is essential to preserve that financial strength and sustain the care our community depends on.

What is Sky Lakes doing to improve its financial performance?

Sky Lakes is pursuing several coordinated initiatives to improve financial performance while supporting quality care and access for our community. Key areas of focus include:

• Improving payment for the care we provide. Andrew Moloatore is leading revenue cycle improvements focused on collecting payments owed by payors, reducing claim denials, and strengthening payor negotiations to obtain appropriate reimbursement.
• Reviewing service line performance. Ron Woita and Dr. Erin Gonzales are leading reviews of our clinical services to identify opportunities to improve operating performance, use resources more effectively, and align services with community needs.
• Improving patient progression through care. Dr. Gonzales is working with physicians and care teams to ensure patients are admitted to the appropriate level of care and receive coordinated discharge planning. This work helps patients move safely and efficiently through their care, reduces avoidable delays, and preserves hospital capacity for those who need it.

Together, these efforts support our goal of returning Sky Lakes to stable operating margins over the next 24 months.

Are staffing reductions planned?

Our current improvement plans are focused on better execution, greater efficiency, and aligning our resources with the needs of our community—not broad workforce reductions.

As healthcare conditions continue to change, we will regularly evaluate our operations and resources to ensure Sky Lakes remains financially sustainable and able to provide the care our community depends on.

How will we know whether the improvement plan is working?

We will track several key measures, including improved collections for the care we provide, lower operating costs, and an improving operating margin. We will also monitor quality, patient access, and workforce needs to ensure that financial improvements support dependable care.

Our goal is gradual, steady improvement. The financial pressures facing Sky Lakes developed over time, and a full recovery will take time as well. We must make thoughtful, sustainable changes at a pace that protects patient care and the people and services our community depends on.

We will regularly review our progress, adjust our approach when needed, and share updates as we work toward stable operating margins over the next 24 months.

Who profits from Sky Lakes?

Sky Lakes has no investors, and is organized as a non-profit public benefit corporation, with a board of directors made up of volunteer citizens who live and work in our community. Each year, after our costs of providing care – including facilities operations, labor, supplies, pharmaceuticals and more – are covered, any leftover dollars stay in Sky Lakes’ accounts for future use or are re-invested into vital capital upgrades or service expansion. In short, our community profits from a financially healthy Sky Lakes.

Will financial pressures affect my ability to receive care at Sky Lakes?

Patients will continue to receive the same level of quality care at Sky Lakes. Our current financial improvement initiatives are designed to strengthen our operations without compromising patient care.

In recent months, we have worked to increase access by adding new physicians and advanced practice providers. We have also opened SkyCare Immediate Care to meet the demand for care for less serious illnesses and injuries, offering patients another convenient option while helping reduce pressure on the Emergency Department.

As we improve our financial performance, our focus remains on providing safe, dependable care and meeting the healthcare needs of our community.

How does Sky Lakes decide whether to expand, consolidate, partner, or discontinue a service?

We begin with the healthcare needs of our community. We evaluate patient demand, quality and safety, staffing, access, and financial sustainability to determine how best to provide dependable care over the long term.

We are also exploring relationships with healthcare providers across the region to improve access and bring additional clinical resources to our community. Examples include discussions with OHSU regarding oncology services and opportunities to support stroke care through tele-neurology. These relationships can connect patients and local care teams with specialized expertise while helping more patients receive care close to home.

Depending on the service, the best approach may be to expand local capacity, bring services together in a more efficient setting, or partner with another organization. If we consider discontinuing a service, access to appropriate alternatives and continuity of care are central considerations. Physicians and care teams help guide these evaluations, with the goal of meeting community needs while sustaining strong local healthcare.

Why is Sky Lakes investing in buildings and services while reporting operating losses?

Improving our financial performance and investing in needed care must work together. Operating expenses—such as wages, medications, supplies, and utilities—are the ongoing costs of providing care. Capital investments, such as purchasing buildings, renovating space, or replacing equipment, create assets that support patient care for many years.

Our strong balance sheet allows us to make carefully selected investments while we work to improve daily operating performance. We evaluate these investments based on community need, opportunities to improve efficiency and access, and their long-term financial impact.

Our new Rehabilitation Services Building is one example. It brings adult and pediatric outpatient therapy services together in a space designed for that care and supports expanded access for patients. We are also planning renovations to use existing space more efficiently and support the expansion of women’s and children’s services.

Purchasing or renovating a building can sometimes be the most practical way to meet a healthcare need. Each investment must have a clear purpose and be weighed against other priorities. Our goal is to address today’s financial challenges while preserving our ability to provide the care our community will need in the future.

What should patients know about Atrio Health Plans?

Sky Lakes continues to experience significant challenges with Atrio Health Plans, including delays in authorizations and claims that are denied or remain unpaid. These issues have resulted in Sky Lakes providing millions of dollars in unreimbursed care and can create additional delays, uncertainty, and administrative burdens for patients and their families. 

Access to care outside our community is also an important consideration. Asante in the Rogue Valley and St. Charles Health System in Central Oregon do not accept Atrio, which may limit access to specialty and other services when care is needed outside the Klamath Basin. 

Medicare Open Enrollment runs from October 15 through December 7, 2026. We encourage Medicare beneficiaries to use this opportunity to carefully review their current coverage and consider the factors that are most important to their healthcare needs—including access to local and regional providers, specialty care, authorization requirements, out-of-pocket costs, and coverage when care is needed outside our community. 

Sky Lakes does not endorse any insurer or recommend that patients select a particular Medicare plan or type of coverage. We do, however, encourage patients to understand their options and make an informed decision about the coverage that provides the access and benefits that best meet their individual healthcare needs.

How is Sky Lakes improving access and care for children?

Sky Lakes is increasing its focus on access to care for children and families in our community. We plan to open a new Sky Lakes Pediatric Clinic in 2027, offering full-spectrum outpatient pediatric care in an environment designed especially for children and families. We are also planning space renovations to improve efficiency and support expanded women’s and children’s services.

We have integrated our inpatient pediatric rooms into the second floor of the hospital, where children are cared for by specially trained pediatric nurses and nursing assistants. This approach allows us to use hospital space and resources more effectively while continuing to care for children who need hospitalization. Newborn care continues in our Family Birthing Center, where babies room with their parents during the first days of life.

Together, these efforts support our commitment to dependable pediatric care and better access close to home.

Why is Holiday Pharmacy (Downtown Pharmacy) temporarily closed?

Holiday Pharmacy is temporarily closed because of pharmacist staffing shortages. We are working to fill pharmacist positions while also exploring other options to serve patients who rely on this location. Prescriptions were transferred to Washburn Pharmacy, and patient instructions were shared when the closure occurred.

We recognize the important service Holiday Pharmacy provides to the surrounding community, including people who have limited access to other pharmacies. We understand that using another location can create transportation and other challenges. Those access needs are an important part of our evaluation as we work toward a solution.

The closure is temporary, and we will share updates as staffing and service options become clearer.

What is changing in radiology services?

Beginning in February 2027, Sky Lakes will transition to a new partnership with Central Oregon Radiology Associates (“CORA”) to provide professional radiology services in all Sky Lakes facilities. This follows our successful transition to CORA for nighttime teleradiology services in mid-2025. Importantly, this partnership will enhance timely access to radiology services, including increased availability of interventional radiology services. The Diagnostic Imaging Department will remain under Sky Lakes’ direct control. All Diagnostic Imaging personnel currently employed by Sky Lakes will continue to remain Sky Lakes employees.

Why do some patients wait longer in the Emergency Department, and what is Sky Lakes doing to help?

Waiting for care can be frustrating, especially in an emergency. Patients in the ER are seen in order of medical urgency, not in order of when they arrive. While this means that patients with less urgent medical needs may wait longer, it ensures that our sickest patients get the life-saving treatment they need as quickly as possible. To shorten wait times, we have launched a new “Provider in Triage” model. During our busiest times, patients are initially evaluated by both a trained Triage Nurse and an Advanced Practice Provider. The Provider in Triage can order lab work or imaging tests, do procedures like stitches or casting, and treat some medical conditions without a patient even leaving the waiting area. For non-emergency illnesses and injuries, patients also have the option of visiting SkyCare Immediate Care, which operates from 8am-8pm, 7 days a week. Patients can even save their place in line at SkyCare by using the I’m On My Way feature in MyChart.

How will the new Therapy Building improve access to care?

Following months of construction, October 5, 2026 marked the opening of Sky Lakes’ brand new Therapy Building, located downtown at 710 Klamath Avenue. All adult and pediatric outpatient therapy modalities are represented in this new, state-of-the-art facility, and we are welcoming many new providers to deliver greatly expanded access for patients.

Are Oregon Tech and OHSU exploring expanded medical education in Klamath Falls?

Yes. Oregon Institute of Technology (Oregon Tech) and Oregon Health & Science University (OHSU) are exploring the potential for a regional medical education campus in Klamath Falls. In early October 2026, the presidents of the two institutions signed a joint statement of interest, marking an exciting development and a critical next step toward bringing expanded medical education programs to our community.

This is an exploration, and a new medical school or regional campus has not been approved. Further planning and evaluation are needed to determine the scope, requirements, and feasibility of potential programs.

Expanding medical education locally could build on existing training opportunities and strengthen our ability to attract and develop the healthcare workforce our region needs.

How will Sky Lakes keep employees and the community informed?

We will update these FAQs as decisions are made and new information becomes available. We will share progress on our improvement work and explain service changes, including what they mean for patients and employees. Our commitment is to communicate clearly about what we know, what remains under evaluation, and what comes next.