PORT ANGELES — Greater patient volumes boosted Olympic Medical Center’s financial outlook in the third quarter of 2011, but hospital officials warned that the long-term prognosis remains highly uncertain.
OMC Chief Financial Officer Julie Rukstad reported Wednesday that OMC’s total margin — income divided by revenue — was 2.5 percent last quarter, bringing the year-to-date margin up to 1.9 percent.
Total margin is the profit that OMC makes to pay the principal on its $20.7 million debt and invest in equipment, information systems and buildings.
A 2.5 percent margin is OMC’s best showing since the fourth quarter of last year.
“We typically budget a 4 percent margin,” Chief Executive Officer Eric Lewis said in the commissioners meeting Wednesday night.
“This year, because of economic times, we budgeted 2 percent.
“We’ll see how the year shakes out.”
Linear accelerator
Lewis attributed the third-quarter improvement to OMC’s new state-of-the-art linear accelerator at the Sequim cancer center.
OMC spent $2.7 million on the Varian TrueBeam technology, which is used to treat cancer with precise, high doses of radiation.
“I think the board’s main goal in doing that was really around quality for our patients and local services for our cancer patients,” Lewis said.
“But our radiation oncology volume is up 13 percent, and the economics has been very positive. And without that, we’d be at a lower margin for this year.”
OMC also opened an orthopedic surgery clinic in Sequim this year.
“Third quarter was up, and I would say the two biggest factors were our cancer center and orthopedic surgery doing well,” Lewis said.
Another piece of good news for OMC was that accounts receivable — the days it takes to get paid for services — is down to 49 days compared with a state average of 63.
“That 49 days to collect our accounts receivable is just way above what most hospitals can do, and I think our employees should be congratulated,” Lewis said.
Rukstad’s quarterly report showed that OMC’s net revenue was $868,000 in the third quarter, or 50 percent over a budgeted $577,000.
“Our third-quarter numbers are good enough that it is producing some good results for the year-to-date numbers,” Rukstad said.
Net revenue for the year is $1.9 million, which is 2 percent over OMC’s budget.
On the down side, OMC is projecting to have $9.4 million in uncompensated care in 2011. The hospital treats all patients, regardless of their ability to pay.
Citing uncertainties in future reimbursement, Rukstad said: “I’m fearful that this number could go much higher than where were are now.”
Rukstad displayed a graph showing how OMC’s uncompensated care has gone up every year since 2006, when the uncompensated care was $5.4 million.
72 percent reimbursement
OMC gets 72 percent of its reimbursement from Medicare and Medicaid, both of which are facing deep cuts.
“I have never seen more uncertainty in the reimbursement area than we have right now,” Lewis said.
OMC stands to lose as much as $5 million if proposed cuts are made to the state’s Basic Health, Disability Lifeline and Certified Public Expenditure programs, Lewis said.
“The state budget is very challenging,” Lewis said.
“I’ve never seen it this bad.”
Long-term cuts to Medicare are also on the horizon, Lewis said.
“Quite frankly, we don’t know what Medicare and Medicaid, which is 72 percent of our business, are going to pay us next year,” Lewis said.
“I can’t ever remember having this amount of uncertainty with this much discussion about cuts and reductions to reimbursement.”
“The budget is still in flux,” he added.
“It’s not going to be easy to put together for 2012, especially given the near-term state cuts that could happen.”
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Reporter Rob Ollikainen can be reached at 360-417-3537 or at rob.ollikainen@peninsuladailynews.com.
