OMC in crisis, says CEO

Hospital says it lost $7.9 million during first four months of year

PORT ANGELES — Olympic Medical Center is facing a financial crisis in which it has already lost $7.9 million through the first four months of 2023 compared to operating losses of $16.1 million in 2022 at the height of the COVID-19 pandemic, CEO Darryl Wolfe told 11 community and healthcare leaders.

While the pandemic itself may have ended, it renewed and deepened longstanding concerns related to escalating labor costs, stagnant Medicare and Medicaid reimbursement rates, and a shrinking number of commercially insured patients, Wolfe said at the RSVP-only event held in the Raymond Carver Room at the Port Angeles Library on Thursday.

”A lot of headwinds have set the stage as to why we’re in this situation,” Wolfe said, adding. “I want to have an honest conversation about what is going on at OMC and the planning that we are doing in light of recent financial results.”

OMC is not alone as hospitals and healthcare systems across the country are pressured by significant financial challenges as they emerge from what the National Hospital Flash Report called the worst year since the start of the pandemic.

The leading contributor to OMC’s financial hardship is labor, Wolfe said.

Employee costs as a percentage of revenues have surged from 62 percent to 72 percent today, Wolfe said. OMC currently uses the services of 78 contract laborers, also called travelers, that cost $300,000 every week, he said, about the three times the cost of employee labor.

Wolfe said that a tight labor market had made hiring and retaining staff across its workforce difficult, noting that OMC cannot compete with hospitals that can offer $50,000 sign-on bonuses for registered nurses.

OMC is Clallam County’s largest employer and currently has 275 open positions from frontline workers such as registered nurses, physicians, and physical therapists to administrative positions in human resources, accounting and information technology (IT).

The chronic problem of poor reimbursement rates for Medicaid and Medicare, which typically pay less than the cost of service, hit OMC particularly hard because 82 percent of its revenue comes from these federal programs, Wolfe said. The share of its patients who use commercial insurance plans like Blue CrossBlue Shield or UnitedHealthcare that often pay double the rates for hospital services, is shrinking.

“OMC has a unique advantage in that our charges are quite low, so those commercial contracts are very important to us, but that part of our pie is shrinking,” Wolfe said.

Clallam County Commissioner Mike French asked Wolfe what kind of impact the Affordable Care Act, the health care reform law enacted in March 2010, had made on OMC’s payor mix finances.

“Fifteen years ago if we were having this conversation I would guess we’d be talking about uninsured or uncompensated care. The Affordable Care Act has taken that on, so how does that not work?’ French asked. “Is that so many of those fell under the Medicaid expansion instead of the subsidy market?”

Said Wolfe: “The ACA has been good for Olympic Medical Center because our self pay used to be about 4 percent of our business and it shrunk to about 1 [percent]. But that 3 percent with the Medicaid — even though it pays less than our cost — it was paying better than just writing things off.”

In listing the stresses on its finances, Wolfe briefly touched on litigation involving OMC and events that allegedly took place in its emergency room last year.

“We had a very unfortunate thing happen in the ER, but it’s worth mentioning that we have a huge liability around the legal case that’s cost us over $1 million,” Wolfe said. “That didn’t help us.”

That incident involved emergency medicine physician, Josiah Hill, who worked in the ER when it was operated by Peninsula Emergency Services (PESI). Hill has been charged with five counts of indecent liberties by a healthcare provider and one count of second-degree rape.

Three of the women who have alleged Hill assaulted them have filed lawsuits against Hill or OMC.

OMC did not renew PESI’s contract and hired Sound Physicians of Tacoma to provide emergency room physicians.

To stem the tide of losses and steer OMC toward a sustainable financial future, Wolfe said, meant “going back to ‘management `101,’ rather than continuing to throw resources at problems.”

Among the solutions he mentioned were continuing to press the state Legislature and federal Congress for relief and implementing a two-phase plan for securing OMC’s financial future.

Phase I, which is now underway, will include a hiring freeze and replacing contract workers with permanent staff; restructuring its debt; finishing some capital projects and shutting down others; and closely monitoring overtime.

Phase II will involve eliminating redundancies in services — such as those that are offered in both Sequim and Port Angeles — and cutting back hours in others.

“We can’t have two of everything,” Wolfe said.

There has been no discussion about eliminating some services altogether, Wolfe said, but, rather what he called a “redeployment of staff and hours.”

“There is a strategic way to do this,” he said.

Communicating changes to the public also will be important, he said.

“We need to right-size expectations,” Wolfe said.

Attending the session were Donya Alward, general manager, Red Lion Hotel; Mike French, Clallam County commissioner; Mary Beth Gregory, director of community impact, United Way of Clallam County; Philip Giuntoli and Anne Marie Henninger, OMC commissioners; Priya Jayadev, executive director, Volunteer Hospice of Clallam County; Brian Smith, chief of police, Port Angeles Police Department; Christy Smith, CEO, United Way of Clallam County; Tom Sanford, executive director, North Olympic Land Trust; Kathy Stevens, COO, Peninsula Behavioral Health; Nathan West, city manager, City of Port Angeles; and two Peninsula Daily News reporters.

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Ken Park can be reached at kpark@peninsuladailynews.com. Paula Hunt can be reached at paula.hunt@peninsuladailynews.com.

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