PORT ANGELES — As outpatient volume continues to sag, Olympic Medical Center is projecting a $480,829 loss in net income — from $2.9 million in 2010 to $2.4 million in 2011 — the preliminary budget shows.
Chief Financial Officer Julie Rukstad presented an overview of next year’s budget Wednesday night.
The seven-member governing board will consider approving a final budget — and a 1 percent tax levy increase — at another meeting at 6 p.m. Wednesday in Linkletter Hall in the basement of the Port Angeles hospital at 939 E. Caroline St.
“I’ve been at Olympic Medical Center for 12 years, and I will say this is the toughest budget we’ve ever had to put together,” Chief Executive Officer Eric Lewis said.
“I think what’s really challenging is first, the volumes. We’re experiencing for the first time, really, since I’ve been here, actual decreases in volumes on outpatient.”
Outpatient volumes are down between 5 or 6 percent in 2010, with inpatient visits holding steady.
Avoiding health care
“What we’re experiencing is employers have gone to $3,000 deductibles and people are avoiding using health care,” Lewis said.
“It’s hard to predict what’s going to happen in ’11, but certainly we’ve experienced a decrease in outpatient volumes, which have affected us this year, and we anticipate it to continue to be at lower volumes than we’ve had in the past.”
OMC is budgeting $131.4 million in operating revenue — up from $3.1 million from 2010 — and $129.9 million in operating expenses — down from $2.6 million this year — for a projected operating income of $1.5 million.
The projected total margin — or “profit” that nonprofit hospitals like OMC make to pay for capital projects — is 1.8 percent.
OMC’s hard-line goal is 4 percent. This year’s total margin is forecast to wind up at 2.2 percent.
“Since we’re only making 1.8 percent, we did cut back on capital in this year’s budget and deferred some things into future years,” Lewis said.
Capital spending
OMC has approved $7.5 million in capital requests — about half as much as department leaders asked for.
Next year’s capital spending includes $3.1 million in medical equipment, $2.5 million for construction projects and $1.3 million for information systems, Rukstad said.
That capital spending includes $800,000 for the design of an expanded emergency department.
“The reason we have to continue to invest in medical equipment, electronic medical records and facilities is, if we don’t invest in those areas, we will be unable to survive as an independent, community-owned hospital,” Lewis said.
“We have to continue to invest to make sure we can maintain our volumes and improve our safety and quality and keep moving forward.”
Commissioner Jean Hordyk asked Lewis if the proposed budget includes staff reductions.
“No,” he said.
“The first part of this budget was to maintain our work force. So this budget does not have any employee reductions in it,” Lewis said.
“But I will say that the salary increase was reduced in order to achieve that result.”
OMC’s expenses are projected to rise 15 percent in medical premiums, 6 percent in utilities, 5 percent for pharmacy and 1 percent for salaries in 2011.
No work force cuts
“We worked with our staff, our medical providers and the departments to prioritize our needs,” Rukstad said.
After losing $8.8 million to bad debt and charity care in 2010, OMC expects to lose another $9.5 million to uncompensated care in 2011, Rukstad reported.
The public hospital district expects to generate an additional $36,241 next year through its annual tax levy increase.
If approved, the owner of a $250,000 house would pay an extra $1.17 next year, from $116.70 to $117.87, Rukstad said.
Meanwhile, Medicare is poised to drop a provision for sole community hospitals like OMC that allows for extra inpatient reimbursement.
“That provision expires effective Dec. 31 this year,” Lewis said.
“If they don’t renew it for 2011, that could cost us $1.6 million. We have not factored that into the budget.
“The budget is challenging, but we’ll continue to monitor it every month.”
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Reporter Rob Ollikainen can be reached at 360-417-3537 or at rob.ollikainen@peninsuladailynews.com.
