PORT ANGELES — The Olympic Medical Center board of commissioners received updates on the hospital’s ongoing compliance issues with the Centers for Medicare & Medicaid Services, as well as its worsening financial outlook, which includes a significant cash shortfall and continued losses.
Interim CEO Mark Gregson said Tuesday that surveyors with the state Department of Health (DOH) noted substantial improvements in their visit last week that focused on medical records and a corrective action plan implemented by OMC.
“There were areas they noted that we see as opportunities for further changes and improvements,” Gregson said. “We made notes on those, and we’re continuing to have those things eliminated.”
OMC will receive the results of the survey next week. It will outline any violations that still need to be addressed and require further action by OMC. The surveyors could alternately accept an OMC action plan for improvement that demonstrates its ongoing efforts to improve the quality of its performance and its ability to sustain those efforts over time.
Gregson said the hospital had requested additional time beyond the usual 10-day window after it received the survey report to craft an action plan.
In its most recent termination letter from CMS, OMC was told its Medicare status would be revoked on Oct. 10. That date will in all likelihood be moved after the hospital submits its plan of correction based on the report from the most recent DOH visit.
Gregson said he recently spoke with the DOH, which conducts surveys on behalf of CMS to evaluate if facilities are in compliance with its rules and regulations.
“They were truly interested in working with us to remedy those things that need to be addressed,” he said.
In September, OMC hired health care advisory company Chartis for $248,000 to assist it with remedying violations DOH has found on repeated visits since February.
In his first presentation to the board, interim CFO Dennis Stillman reported that, with just 23-30 days of cash on hand, OMC had fallen below the 60-day cash minimum that is part of its agreementwith bond holders.
Its cash reserves have steadly declined from 90 days in 2022, 56 days in 2023 and 29 days in 2024. They fell from $62 million in 2022 to $24 million today.
KeyBank, one of the bondholders, is not going to force OMC to pay it back, even though the hospital had not met the reserve target for the past two years, Stillman said.
“They’re saying, ‘Keep us informed about what’s going on and keep making progress,’” Stillman said.
OMC has not defaulted on any of its loans, he added.
After losing $56 million over the past three years, Stillman said OMC is on track to lose $16 million this year. Contributing to that is no longer qualifying for the federal 340 B Drug Pricing Program, which will cost it about $3.2 million annually.
One of the first things Stillman said he noticed when he began reviewing OMC’s financials shortly after arriving in September was the increases in accounts payable. The amount rose from $8 million in 2021 to $29 million, which was an indication OMC was delaying payments to vendors because it was short on cash.
“In essence, this gives us money,” he said. “We’re getting the goods, but we aren’t paying our bills all the time.”
Although no one has yet to refuse to deliver goods and services, that could end.
“Our vendors aren’t happy with us,” Stillman said.
Along with partially funding operations by allowing its accounts payable to grow, OMC had not curbed its capital spending to reflect its financial decline.
“We continue to buy equipment at the same rate that we’ve done before, even though we’re losing money,” Stillman said. “We’ve spent a lot of money getting to today,” he said.
Gregson said operational change and improving productivity are key issues to repair the hospital’s financial position.
The No. 1 goal would be to reduce capital spending — only investing in those projects that are absolutely essential to health and safety.
“We make sure we can maximize every single one of those dollars we save to help replenish cash,” he said.
Every department will be tasked with increasing productivity and controlling spending.
“It’s not about draconian measures, it’s about how many people do we need to take care of patients today,” he said.
“That will be an every day discipline.”
This sharp correction was needed, Gregson said.
“Whatever we’ve done in the past, whatever we’ve had in the past, is kind of irrelevant,” he said. “We’re going to be looking at every single thing we purchase and ask, ‘Why did we buy that?’ and ‘Do we need to keep buying it?’”
Two-year contract
In board action, commissioners unanimously approved a two-year contract with Radia to provide onsite radiology services for $1,899,300 per year. OMC’s current contract with Radia expired Tuesday, which necessitated moving the board’s usual Wednesday meeting ahead one day for the vote so the hospital could continue with radiology services uninterrupted.
The board also unanimously approved a $308,000 contract with Siemens for replacing the hospital’s building management system software that controls its HVAC, lighting, safety, security and fire systems.
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Reporter Paula Hunt can be reached by email at paula.hunt@peninsuladailynews.com.
