Ruling cuts Olympic Medical Center funds

Appellate court reverses prior decision on Medicare reimbursement

PORT ANGELES — Olympic Medical Center commissioners have learned details of a federal Court of Appeals reversal of a lower court ruling on site-neutral Medicare payments.

July’s reversal means OMC will be subject to the original cuts made by Center for Medicare and Medicaid Services (CMS) and must pay back some funds.

Hospital officials had estimated the cuts in Medicare payments could mean a loss to OMC of at least $47 million in revenue over the next decade. It also opens the door for cuts in more services than were originally selected, said Jennifer Burkhardt, OMC’s chief human resources officer and general counsel.

Burkhardt said OMC was financially stable after budgeting for the reimbursement cuts in advance, but continued cuts could affect patient services at clinics more than 250 yards from the main campus, such as those in Sequim.

“The ability of OMC to deliver health care services to our community will depend on the level of [government] reimbursement we are able to secure,” Burkhardt said.

A three-judge panel found in July that the U.S. Department of Health and Human Services, which oversees CMS, was acting within its authority when it reduced some payments to off-campus hospital outpatient departments to make them consistent with other outpatient payments, according to an opinion field July 17 from the U.S. Court of Appeals for the District of Columbia.

The ruling reverses a district court decision that determined the rate change in the 2019 Outpatient Prospective Payment System was outside of HHS authority.

The American Hospital Association and other hospitals fighting the change had argued HHS did not act in the required budget-neutral manner and also otherwise flouted congressional intent expressed in a 2015 bi-partisan budget bill.

The appellate court reversal represents the latest salvo in a lengthy legal battle between the American Hospitals Association, of which OMC is a plaintiff, and CMS.

In November 2018, CMS implemented a site-neutral rule, meaning Medicare reimbursements at clinics more than 250 yards away from a hospital’s main campus were cut by 30 percent beginning in 2019.

The policy led to the hospital officials pausing their plans for expansion of primary care in Sequim.

The reimbursement percentage was doubled to a cut of 60 percent to clinics for 2020 when the second phase of the site-neutral rule was implemented in November 2019, despite a federal judge ruling in September 2019 that CMS “exceeded its statutory authority when it cut the payment rate for clinic series at off-campus provider-based clinics.”

CMS expects to save more than $800 million in reimbursement payments in 2020.

OMC started to receive repayments reflecting the 2019 cuts after the initial federal court ruling, but those repayments have ceased since the July appeals court reversal, Burkhardt said.

“CMS began paying us back 30 percent on a claim-by-claim basis and 60 percent for 2020 patients,” Burkhardt said. “And then they stopped the payback in July, and now we will be processing the claims to pay them back as the reimbursement cuts will go back into effect.”

Burkhardt said the AHA argued against the Chevron Doctrine, a legal principle that compels federal courts to defer to a federal agency’s interpretation of an ambiguous or unclear statute that Congress delegated to the agency to administer.

This case has essentially created a three-ring circus among the three branches of government.

“The judiciary is deferring to an [executive branch] agency that overruled the legislative branch,” Burkhardt said.

She described OMC’s legal options moving forward as a “Hail Mary” to board members Wednesday.

“We can ask the three-member court of appeals panel to ask all nine circuit court judges if they will rehear the case,” Burkhardt said.

“The second option is to appeal to the U.S. Supreme Court, which has the discretion to hear cases. The Supreme Court grants less than 1 percent of the requests to hear cases, and if that avenue is denied, the court of appeals decision becomes final.”

Potential changes also could come if there’s a change in administrations after the presidential election in November.

Burkhardt said OMC would continue to work with the area’s elected officials at the state and federal levels to secure adequate funding.

“With 83 percent of our payer mix, those that we serve, on Medicare and Medicaid, we can’t take our eye off the ball in terms of government reimbursement,” she said. “We will be requesting quite a bit of support from them.”

Wolfe confirmed

Hospital commissioners on Wednesday also unanimously approved the hiring and compensation package for new CEO Darryl Wolfe.

“The support, the best words I can think of, are flattering, humbling and overwhelming all at the same time,” said Wolfe, OMC’s former chief financial officer.

“I’m honored to be selected. I’ve been here 14 years … and I’ve never worked with a smarter, more committed and talented group of people through all the levels of this organization.

“I know it’s going to be hard at times, but the best and most rewarding things in life are the most challenging and difficult.

“I will do my best. This is a team sport. It takes 1,500 people to run this thing every day. I’m confident that, in working together, we will do great things.”

Wolfe was named incoming interim CEO in January and has served in the role since June 2 after former CEO Eric Lewis left to work as the new chief financial officer for the Washington State Hospital Association.

He will oversee a $221 million operations budget and nearly 1,600 employees, according to OMC marketing and communications director Bobby Beeman.

Wolfe will receive base compensation of $212,417.92 per year with an annual incentive plan of up to 15 percent, a $450 per month car allowance and a $75 cell phone stipend.


Sports reporter Michael Carman can be contacted at 360-406-0674 or at

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