OMC approves budget with cuts: Hospital to lose $1.7 million in Medicare reimbursement

PORT ANGELES — Olympic Medical Center commissioners Wednesday approved a 2019 budget that addresses the $1.7 million loss the hospital faces as a result of cuts to Medicare reimbursements to off-site clinics.

The budget calls for the public hospital to maintain all services and keep all current employees, though some services will now be offered on the main campus instead of off-site.

“The biggest area we’re going to do is we’re going to move services closer to the hospital in the medical office building,” OMC CEO Eric Lewis told the board Wednesday.

“Several services we currently do at Eighth and Vine will move to the medical office building and they aren’t subject to this 30 percent cut.”

He said some, but not many, of the services offered in Sequim also will move to the main campus. Moving services accounts for a $500,000 savings because they would then be unaffected by the cuts.

Earlier this month, the federal Centers for Medicare and Medicaid Services announced it would move forward with 60 percent cuts to Medicare reimbursements at off-site clinics, despite the more than 1,700 letters and comments from Clallam County residents arguing against the measure.

The final rule phases in the 60 percent cut to OMC in practice expense reimbursement for patient visits more than 250 yards from the Port Angeles hospital.

As a result, reimbursement to OMC will be cut by about $1.7 million in 2019 and another $1.7 million in 2020, officials said. The cost over 10 years is about $47 million.

After moving services, the hospital is still facing $1.2 million in cuts, which are absorbed in the 2019 budget.

The largest cut in the budget is to professional fees, cut by $495,000. That cut was primarily possible because the hospital recently hired two medical oncologists.

Salaries and benefits will be cut by $343,000 because the hospital will not be hiring as many employees as anticipated and will be cutting overtime costs.

Supplies were cut $116,000. Purchase services were cut $85,000.

A number of other smaller cuts were made as well.

“That really helped us balance the 2019 budget,” Lewis said.

He said staff are also proposing to defer the Sequim Primary Care expansion, a $5 million capital project, and defer the Sequim Outpatient Surgery project, also a $5 million capital project.

The budget leaves the hospital with a $4 million positive margin, which Lewis said is needed for paying principal on debts and investing in buildings.

Revenues are budgeted for $213 million and expenses are budgeted at $209 million.

Commissioners also approved a 1 percent increase to its levy, which amounts to a $42,000 boost. Levy funds are used to maintain trauma level-three services, birth center services and provide services to all patients regardless of ability to pay.

As the hospital braces for the cuts, it is also preparing to sue to federal government over the cuts.

On Nov. 7, the hospital board agreed to join the American Hospital Association’s lawsuit against the federal Department of Health and Human Services over the cuts.

A spokesperson for the AHA said the lawsuit would likely be filed in U.S. District Court in Washington, D.C., in the coming weeks. OMC is expected to join a handful of other hospitals across the country in the lawsuit and may seek an injunction to block the cuts while the litigation is pending.


Reporter Jesse Major can be reached at 360-452-2345, ext. 56250, or at

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