Financially speaking, Olympic Medical Center stands tall among hospitals statewide, an Everett accounting firm’s audit has concluded.
The hospital also outperforms neighboring public healthcare facilities in Jefferson County and Forks.
“I would definitely put Olympic Medical Center in the category of a very successful hospital,” certified public accountant Don Hansen of Everett told hospital commissioners Wednesday at their regular twice-monthly meeting.
“This organization is in an exceptionally strong financial position.”
But several issues present serious challenges to Clallam County Hospital District No. 2, Hansen said.
They include a hospital census that shows an increasing number of Medicare and Medicaid patients whose government-paid reimbursements to the hospital do not cover the entire cost of care.
Other issues include the community’s increasing reliance on the hospital contracting with and hiring doctors who won’t practice in rural areas such as Clallam County without that financial backing.
Then there’s the upward spiral of hospital costs and the funding of future capital projects, he said.
The hospital’s three-year, $45 million capital plan will knock the hospital off at least one financial pinnacle: freedom from long-term debt.
It’s been since 1982 that Olympic Medical Center incurred such debt, and Hansen said it’s the only hospital in the state without the burden.
That will change in April, when the board is expected to approve borrowing $10 million to expand the Olympic Medical Cancer Center in Sequim, build an ancillary services building with space for 15 to 17 physicians and cardiac and other medical services, also in Sequim, and make major improvements to Olympic Medical Center in Port Angeles.
The loan is so large that bank branches on the North Olympic Peninsula can’t handle the transaction on their own, though the banks’ main branches can, Chief Financial Office Eric Lewis told the board.
In April the board will decide whether to borrow the money at a fixed rate, now 3.5 percent; a variable rate, now 2.5 percent; or through a loan that combines the two.
But the hospital district should be able to meet capital needs if it continues to show an operating margin of between 4 percent and 5 percent, Hansen said.
That’s the district’s target for 2005.
Operating margin is the profit shown before interest on debt and depreciation is deducted.
Olympic Medical Center’s operating margin of 4.2 percent in 2004 compares with 3.5 percent for Jefferson Healthcare hospital and 0.9 percent for Forks Community Hospital.
Other highlights of Hansen’s report included the following:
* Salaries and benefits constitute 53.4 percent of Olympic Medical Center’s operating revenue, second highest among similar sized hospitals in Wenatchee, Anacortes, Richland and Kennewick.
That’s a decline from 55.4 percent in 1999 and 2000.
Benefits paid to Olympic Medical Center employees are the highest as a percentage of salaries and wages among the five hospitals.
* The average salary and benefits package for Olympic Medical Center employees totals $43,500.
Of that, 28 percent is benefits, making the average wage $31,300 for each employee.
In 1999, the median household income in Clallam County, not including benefits, was $36,499, according to the 2000 Census.
* The district’s total tax levy rate of 16 cents per $1,000 is second lowest among Washington’s 43 public hospital districts.
By comparison, Jefferson Healthcare (44 cents per $1,000) is 16th lowest and Forks Community Hospital (97 cents per $1,000) is 39th lowest.
“I would be proud to be a taxpayer here,” Hansen said in an interview after his presentation.* Charity care increased in 2004 to $2.66 million, or 4.3 percent of revenue, compared with $1.85 million in 2003, or 3.2 percent of revenue.