PORT ANGELES — After hearing a cloudy financial forecast, Olympic Medical Center commissioners were told Wednesday that a proposed affiliation with Swedish Medical Center would help improve the bottom line.
OMC’s net revenue was 18 percent under budget for the first half of 2011, Chief Financial Officer Julie Rukstad told the seven commissioners in their bimonthly meeting at the Port Angeles hospital.
As of July, operating expenses were $77.8 million compared with a budgeted $75.4 million, and net revenue was $1.18 million compared with a budgeted $1.44 million, Rukstad said.
“It’s going to be a very difficult budget year,” she said.
The hospital district’s total margin — the profit that a nonprofit makes to pay down debt and invest in capital — is 1.5 percent this year compared with a stated goal of 4 percent.
OMC has hit the 4 percent mark just once, in 2009, in the past six and a half years.
Hospital debt
“The reason we need the 4 percent is really to pay the principal on our debt,” Chief Executive Officer Eric Lewis said.
The hospital has about $21 million worth of debt, Lewis said, “and we have to have money to buy our capital, which is mainly equipment, IT and buildings. I think our net income is definitely the biggest challenge we face.”
Nearly half of OMC’s debt is a $10 million limited tax general obligation bond to fund the expansion of the hospital’s cramped emergency room.
OMC officials said they need to expand the ER to meet the community’s needs.
The bond will be paid back over 10½ years at a fixed rate of 2.9 percent.
Swedish affiliation
Financial challenges are one of several reasons why OMC, Jefferson Healthcare and Forks Community Hospital are in negotiations with Swedish Medical Center for a 20-year affiliation.
The idea is to provide more services locally and gain economic benefits such as joining a large buying group and implementing Swedish’s state-of-the-art electronic medical records system.
Executives from OMC, Jefferson Healthcare and Forks Community Hospital were in negotiations with the Seattle-based medical center last week.
“Our affiliation with Swedish is getting very close,” Lewis said.
“We should have a draft to the board within the next few weeks. We do anticipate having that ready for board action in October,” Lewis said.
“So hopefully, by the third Wednesday in October [Oct. 19], the board will be in a position to consider that Swedish affiliation.
“I think it will have some very positive things for Olympic Medical Center.”
Electronic records
One of the key benefits would be the implementation of Epic electronic medical records, which Lewis described as the “best product on the market.”
The proposed affiliation is not an asset deal or a merger, Lewis has repeatedly said.
In return for referring patients to Swedish for care that they can’t get on the Peninsula, Swedish will help the local hospitals expand their own services, beginning with neurology, cardiology and sleep medicine in OMC’s case.
Said Lewis: “The biggest single challenge we face I think is the economy, and the economy does not appear to be getting better fast.
“It’s certainly very challenging right now from Medicare and Medicaid reimbursement. I think what’s really changed in health care is private insurance — or small and large businesses that provide insurance and individuals that buy it — are really struggling to pay for their premium and much higher deductibles.”
Commissioners were also briefed on the progress of the 29 goals in OMC’s strategic plan. OMC is on target for 19 goals. Seven are too soon to tell, and three financial goals — income, debt and expenses — are behind target.
“We will continue to work in that area,” Lewis said.
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Reporter Rob Ollikainen can be reached at 360-417-3537 or at rob.ollikainen@peninsuladailynews.com.
