PORT ANGELES — Olympic Medical Center is in good condition — considering the condition it’s in.
That’s to say, although the present financial prognosis is good, OMC remains a small rural facility that relies heavily on government health care payments in an increasingly competitive environment.
Eighty-three percent of OMC’s reimbursement comes from government sources — 60 percent from Medicare, which itself is beset by politics, repeated policy changes and regulations that shift like a kaleidoscope.
Yet the Clallam County Hospital District 2 — OMC’s public owner-operator — is constructing a new medical office building for $14.2 million, preparing to remodel its CT scanning space for $614,000, drawing up a $750,000 plan to expand its Sequim Medical Campus, and budgeting more than $4 million for new medical equipment.
The bottom line of next year’s budget: Net income of $4.765 million.
The goals of the spending and expansion, according to hospital CEO Eric Lewis:
■ Provide services and facilities locally, not send patients to Silverdale or Seattle. That, said Lewis, means being better than the bigger competitors.
■ Provide local jobs — more than 1,200 of them — to retain revenue within Clallam County.
Lewis is especially proud that OMC laid off no employees during the recent recession — perhaps the only hospital of its size in the region not to do so — although it didn’t fill every vacancy that occurred.
“When we have tough economic times, we don’t head toward layoffs as our solution,” he said. “We try to prioritize maintaining local employment.”
■ Maintain local control of a public medical center governed by seven elected directors who meet and make decisions in public at meetings held twice each month.
So, does OMC want to become too responsive to its Clallam County clientele and too well staffed and equipped to lose patients and payments to larger hospitals — perhaps even too big to buy?
Yes, Lewis said, noting that other small rural medical centers have cut back on staff and services until they have disappeared or been absorbed by larger organizations (see breakout).
Virginia who?
That wasn’t the hospital’s strategy a decade ago, when Virginia Mason Medical Center in Seattle — in a closed-door meeting to which Lewis said no Clallam County health care officials were invited — decided to close its primary clinic at 433 E. Eighth St., in Port Angeles.
Virginia Mason left town, leaving 11 doctors and thousands of patients high and dry but leaving not so much as its computers behind.
Mike Glenn, OMC’s CEO at the time, openly opposed bringing primary care under OMC’s umbrella.
The hospital’s elected directors overruled him, however.
The hospital bought the clinic for $1.6 million, remodeled it to Medicare standards for another $900,000, and after 10 months of negotiations that were kibitzed by a citizens group, hired nine of its doctors at salaries and supplements nearing $200,000 apiece.
Now, Olympic Medical Physicians, the corporation created after Virginia Mason pulled out, occupies the original clinic and a second facility at Eighth and Cherry streets.
They function as health care portals, receiving patients they might send on to specialists, radiologists, and lab analysts.
Lewis makes no apologies for OMC’s moneymaking services, saying they support the cost of a 24/7 hospital that’s also a Level 3 trauma center, the only one between Aberdeen and Bremerton.
The 68-bed inpatient facility seldom operates at capacity.
Thanksgiving was an especially expensive day when a full complement of lab technicians, nurses, radiology techs, general and orthopedic surgeons, emergency room doctors, physicians and, yes, housekeepers were on hand at 939 Caroline St., in Port Angeles.
Once, Medicare and Medicaid underwrote those costs, he said, but now rising expenses have exceeded payments.
“We need to look to outpatient services to help spread out those fixed costs,” Lewis said about such amenities as the Sleep Center, cardiac care services, medical resonance imaging, Olympic Cancer Center, and other specialty facilities.
“We are trying through service and quality and programs and convenience to earn people’s business in Clallam County to help cover the cost of keeping the hospital open.”
What money buys
Like many similar documents, OMC’s 2016-2018 strategic plan is filled with phrases such as a promise “to ensure integration of services that focus on patient flow throughout our system.”
The document, though, also is lucid enough that it spells out “measurable goals” that include:
■ Recruiting primary care providers plus specialists in psychiatry, rheumatology, obstetrics/gynecology, pulmonology, orthopedic surgery, cardiology, oncology, and gastroenterology.
■ Opening a walk-in clinic in Port Angeles by the end of 2016.
■ Starting an outpatient surgery center in Sequim in 2018.
■ Adding a palliative (pain-relief) program for end-of-life patients in hospice beds by the end of 2017.
Not that it will come without costs.
Commissioners recently levied a 1 percent increase to their property tax revenue, which otherwise would have dropped to 0.2 percent due to low inflation.
The boost will produce $39,700 in 2016 that OMC already has budgeted for uncompensated care.
Budget assumptions also include raising charges 5 percent for inpatients, and 4 percent for outpatients and clinic clients.
2-year transformation
Chief Financial Julie Rukstad’s third-quarter year-to-date financial presentation two weeks ago was positive.
Although surgeries declined 3 percent from 2014, clinic visits climbed 14 percent, CT scans rose 18 percent, oncology procedures increased 29 percent, and home health visits ballooned 40 percent from Sept. 30, 2014, to the same day this year.
Operating income rose to $6.855 million, 304 percent above levels budgeted for 2015, while bad debt and charity dropped $2.116 million, or 37 percent, largely thanks to increased coverage by the Affordable Care Act.
Perhaps most telling was the difference in the district’s total margin, which in mid-2013 had plunged more than 4 percent below breaking even, but rebounded to nearly 6 percent in the black in September.
In the middle of 2013, OMC had enough cash on hand to stay open only 69 days. As of Sept. 30, it could pay its bills for the next four months
The figures seemed to lend realism to the strategic plan’s vision:
“Olympic Medical Center will remain a viable community-owned and operated medical provider and earn its place as our community’s first choice for quality, compassionate and convenient health care.”
SARC’s mistake
Lewis cited the Sequim Aquatic Recreation Center, which he said did not alter its business plan but relied on taxpayer support — which voters repeatedly denied.
SARC has closed and could reopen only if an agreement is made that the Olympic Peninsula YMCA will take over management, under the auspices of the SARC board.
“SARC tried to stay the same,” Lewis said. “If OMC stays the same, we will not survive.
“We need to be better; we need a lot of innovation; we need to improve our service and our quality; and we’re really doing that.”
While many other small health care institutions drop services and cut staff, OMC doubles down on growing too successful to need rescuing by a corporate or faith-based organization, too good to lose patients to Seattle-area institutions and too loyal to Clallam County residents to forfeit their support.
In 2008, voters in the hospital district that stretches from the west end of Lake Crescent to Gardiner boosted its property tax from 11 cents to 44 cents per $1,000 of real property’s assessed value.
The vote was 11,292 to 9,811.
“There’s a saying that you can keep cutting back until you close the doors,” Lewis said.
“But if you earn people’s business and grow, you’ll be much more successful.”
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Reporter James Casey can be reached at 360-452-2345, ext. 5074, or at jcasey@peninsuladailynews.com.
