Medicare payments are in decline

American health care is undergoing a revolution and Olympic Medical Center is scrambling to meet the challenge.

The medical center's CEO Eric Lewis says there are three "game changers" rocking the medical world and some will hit the Olympic Peninsula with particular force. In meeting these challenges, "incremental change" won't work, he said.

He said his organization needs immediate improvements in efficiency, better regional planning and will seek an affiliation with a medical center providing specialized consultative care.

Seeking an associate

OMC is sending out this week a "request for information" to larger hospitals in Seattle, Tacoma and Bremerton to gauge interest in serving as a tertiary medical center. The tertiary affiliate would provide a number of useful services including those "third-level services" OMC can't provide, such as open-heart surgery, neurosurgery, care for severe burns and neonatal intensive care, Lewis said.

He said utilizing the tertiary affiliate would be up to patients but if they choose that option, they would receive excellent, cost-effective service.

A larger affiliate also could help OMC meet other challenges including the electronic medical record keeping requirements and other mandates in the new federal health care law. The tertiary associate also would be involved in creating a strategic vision for the area.

If a likely affiliate expresses an interest, staff at OMC will create a more specific plan for working with the new associate, Lewis said. Work on the plan could begin as soon as Oct. 15.

An economy in the doldrums

The long-running recession also is having an impact on medical care delivery, as private companies cut down on the insurance coverage they offer their employees.

"Individuals are facing a choice," Lewis said, "pay the mortgage, pay for food or pay for insurance. Pick two."

Lewis also described the federal government's woes, saying the current $1.4 trillion deficit is unsustainable.

Cuts already are planned for Medicare reimbursements, the source of 55 percent of OMC's revenues. Inpatient reimbursements will decline by 0.4 percent beginning Oct. 1. That alone will cut reimbursements to OMC by $564,000 a year. Another $1.5 million in cuts also is slated.

Altogether the cuts in the new federal health care reform bill reduces Medicare reimbursements to OMC by $26 million over the next 10 years.

Lewis said all hospitals in the U.S. will suffer from cuts, but the hardest hit are those medical centers in rural areas with high numbers of Medicare patients. OMC, he said, will take a disproportionate hit. OMC's Medicare reimbursements already are in the bottom 10 percent of those paid to facilities across the U.S. As Lewis noted, reimbursements for Florida hospitals are double those OMC receives.

Medicaid payments, which are issued in Olympia, also are insufficient, a problem that will grow as the number of Medicaid patients served by OMC continues to expand.

"We have to operate in the free enterprise system," Lewis noted, but "Olympia and D.C. don't." Because Medicare and Medicaid together constitute 70 percent of the center's overall revenues, Olympic Medical Center is seeking ways to make do with less.

The new health care law also requires all medical centers to move quickly toward a more efficient, more widely networked electronic medical records system. While there's some funding available for the task, the fact that everyone is moving rapidly in the same direction is causing logistical problems. The impetus for quick action is found in the law: Those facilities that haven't achieved the stated objectives by 2015 will see further cuts to their funding.

Meeting the goals

Lewis said his team is dedicated to meeting four goals. OMC, he said, will remain a locally controlled public hospital and it will remain financially viable. It will provide local service and it always will seek to ensure quality patient care, with safety and satisfaction as top priorities.

Lewis said OMC is responding to these challenges with a multi-part plan, beginning with better regional planning. He said the collaborative system that has been created with Forks Community Hospital, Jefferson Healthcare in Port Townsend and OMC already is paying dividends and should be expanded.

In addition, the hospital will continue to seek improvements in its health care delivery system, with a special focus on quality care and patient safety. Better electronic record keeping also will enhance the bottom line, as will other cost-management strategies.

Lewis also said it's very important to retain the center's physicians and other skilled workers.

Reach Mark Couhig at

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