PORT ANGELES — Olympic Medical Center wants to stay independent but get some of the benefits of being part of a larger heath care system.
That’s the idea behind a proposed affiliation with Seattle-based Swedish Medical Center, Chief Executive Officer Eric Lewis told six commissioners — with Commissioner John Beitzel absent — at their bimonthly meeting Wednesday.
“We’re kind of putting one leg in both camps,” Lewis said.
“Rather than staying totally independent or totally joining a system, our proposed Swedish Medical Center affiliation is getting some of the benefits of a system but remain an independent hospital.
“It’s not an asset deal.”
Lewis said the affiliation will be his major focus over the next month.
Intense negotiations
Executives from OMC, Jefferson Healthcare and Forks Community Hospital will meet with Swedish officials in “very intense negotiations in the coming weeks,” Lewis said.
The North Olympic Peninsula hospitals would become the first members of the Swedish Health Network, so the parties are being meticulous in setting up the affiliation, he said.
The three Peninsula hospitals decided more than a year ago to pursue the affiliation as a group. They narrowed seven choices to one in a series of joint board meetings.
After a round of public meetings, the respective boards of the OMC, Jefferson Healthcare and Forks Community Hospital will consider formal approval of the affiliation this fall.
The Peninsula hospitals would refer patients to Swedish for care they can’t get locally.
In return, Swedish would help the Peninsula hospitals expand local services, implement electronic medical records, recruit specialists, buy supplies at a lower cost and make other improvements.
Lewis discussed the Swedish affiliation after a larger presentation on the contract negotiations between OMC and Service Employees Healthcare 1199NW.
Visit http://tinyurl.com/3jovln4 for a recap that appeared in Thursday’s Peninsula Daily News.
Lewis bridged the two presentations by describing the financial challenges that OMC and other hospitals face.
He displayed an ominous graph that shows how OMC’s total margin — the profit that a nonprofit organization makes to pay down debt and invest in capital — has fallen from 10 percent in 2001 to 1.6 percent in 2011.
A healthy hospital has to maintain a 4 percent margin or better, he said.
About 72 percent of OMC patients are on Medicare or Medicaid, and OMC is in the bottom 10 percent of all hospitals for Medicare and Medicaid reimbursement, he said.
Future cuts in reimbursement are on the horizon, Lewis said.
“The bottom line is, we’re going to get paid less the next two years than we previously got paid,” Lewis said.
Uncompensated care
But Lewis said his “biggest fear” is rising uncompensated care, which accounts for 6 percent of OMC’s total business.
“Federal and state law requires us to do free care,” he said.
“When nobody pays for it, we have to charge our other patients for it.
“Medicare and Medicaid don’t allow us to charge them more, so it really falls on commercial insurance to pay for the uncompensated care,” he added.
Lewis reeled off a list of Western Washington hospitals that are laying off workers or joining larger health care networks because they couldn’t make it on their own.
“I think major changes are coming in the health care industry, the hospital industry, in the coming years,” Lewis said.
“I think it will surprise people what’s going to be happening because of reimbursement cuts and challenges on costs rising when reimbursements go down.”
Lewis said the board “should have the discussion” on what joining a system would mean for OMC employees, patients and the community.
“I think over the next five to 10 years, there is certainly no guarantee that Olympic Medical Center can continue to be an independent hospital,” he said.
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Reporter Rob Ollikainen can be reached at 360-417-3537 or at rob.ollikainen@peninsuladailynews.com