Olympic Medical Center’s clean audit still has concerns

Published 1:30 am Friday, May 8, 2026

PORT ANGELES — Olympic Medical Center commissioners unanimously approved an audit that showed a clean opinion on its 2025 financial statements, but Baker Tiller also warned of substantial doubt about the hospital’s ability to continue operating as a going concern because of continuing losses, liquidity pressures and declining cash reserves.

Baker Tilly’s Mary Wright said OMC has regained compliance with one debt covenant by completing its audited financial statements before the end of April, as required under agreements tied to the hospital’s bonds and financial institutions. But she said the hospital remains out of compliance with other covenant measures, including days of cash on hand and its debt coverage ratio, which measures whether the hospital is generating enough revenue to make debt payments.

“Every covenant, every ratio, everything that we look at is incrementally worse,” Wright said.

Auditors also reviewed management’s plans to improve the hospital’s finances but said it was too early to assess the results.

Wright said the substantial doubt finding could be removed if OMC’s financial condition improves.

Commissioner Gerald Stephanz called the audit a “very sobering report” and reminded the board on Wednesday that the hospital is projected to lose $7 million to $8 million this year. Stephanz also raised concerns about the impact of possible future Medicaid cuts, saying the board needs to review the 2026 budget.

Hospital administrators pointed to several first-quarter financial and operational metrics they said showed signs of improvement.

Interim CEO Mark Gregson said the hospital has reduced its workforce by about 140 positions since September without layoffs, largely through attrition and leaving vacancies unfilled. He said payroll expenses are running about $300,000 less every two weeks than projected.

Amanda Christenson, the treasury manager who presented the first quarter financial report in interim CFO Dennis Stillman’s absence, said OMC’s days of cash on hand declined by two days during the first quarter of 2026, but largely because it used available cash to reduce accounts payable by about $1.8 million and to pay down debt.

Gregson said OMC is beginning to see “tangible results” from operational and staffing changes that have been implemented. Patient volume, he said, is increasing due to lower wait times and an increase in clinic visits.

He cautioned, however, that OMC’s turnaround remains in its early stages.

“We are not naive enough to think we’re out of the woods,” he said.

Stephanz pushed back, saying the hospital still faces scheduling problems. He asked administrators to provide clearer data showing quarter-by-quarter increases in outpatient and clinic visits.

Critical access

Separately, board President Phil Giuntoli announced that OMC will begin considering whether to pursue designation as a critical access hospital as well as initiate the process of hiring a permanent CEO.

He said discussions during a recent board retreat prompted the initiatives.

OMC currently is reimbursed under Medicare’s Prospective Payment System, in which payments often do not cover the full cost of care — one of the financial pressures contributing to the hospital’s ongoing losses.

Critical access hospitals, like Jefferson Healthcare in Port Townsend, receive Medicare reimbursement based on the actual cost of providing care plus 1 percent.

Obtaining critical access designation would require OMC to reduce its licensed bed count from 67 to 25.

Commissioners approved a measure 4-3 directing administration provide a report covering the financial and operational impacts of becoming a critical access hospital, including how a 25-bed limit and potential patient transfers could affect hospital operations and access to care, and what effect reduced services could have on the community.

Carleen Bensen, Nancy Field, Thom Hightower and Stephanz voted in favor. Giuntoli, Tom Oblak and Penney Sanders opposed.

Supporters said the study would provide information needed to evaluate whether OMC should pursue critical access designation, while opponents questioned whether the work will duplicate analysis already being conducted by consultant Kaufman Hall as part of OMC’s ongoing affiliation discussions with UW Medicine. They also expressed concern it could divert staff time and resources while the hospital remains under significant financial and operational strain.

Giuntoli said it is time to start looking for a CEO to replace Gregson, who was hired on an interim basis, but OMC first needs to finish discussions with UW Medicine to know what kind of affiliation it might propose with OMC. The timeline to finalize the organizations’ nonbinding letter of intent is Aug. 31.

OMC could potentially use WittKieffer — the same executive search firm through which Gregson currently serves under contract — to conduct the search.

Structure change?

Gregson said OMC is evaluating whether to change its leadership structure following the planned June departure of Chief Medical Officer Dr. Allen Chen.

Gregson said the hospital is considering a model that would pair a full-time operations executive with a part-time physician leader focused on clinical oversight, rather than relying on a single combined role as it is now.

Commissioners Bensen and Field raised concerns about proposed changes to the leadership structure, with Bensen saying OMP Primary Care Clinic physicians felt they were being “cut out” of management decisions and both commissioners arguing that significant organizational changes would require board approval.

In other action, commissioners unanimously approved the renewal of OMC’s professional liability insurance coverage on a 7-0 vote, including annual policies not to exceed about $1.94 million for primary coverage and about $510,000 for excess coverage, with premiums paid quarterly.

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Reporter Paula Hunt can be reached by email at paula.hunt@peninsuladailynews.com