The Olympic Medical Center board of commissioners will explore partnering with another healthcare system to ensure the hospital’s long-term viability, support its staff and providers, and continue to deliver care.

Their unanimous decision on Dec. 4 to launch a process that will consider whether a partnership or remaining independent is the right course to take was not an easy one, commissioners said. However, OMC’s dire financial straits, which it largely blames on low Medicaid reimbursement rates, gave it very little choice, they said.

“When I came onto the board, I was absolutely committed to the proposition that this was going to remain an independent public hospital,” Commissioner Phyllis Bernard said. “That’s where my heart was and where my soul was.”

“That being said, there are certain realities that the heart and soul can’t change, including 80 cents on the dollar from our No. 1 payer in a county that is aging rapidly. That is a fix that cannot be managed through.”

Like most hospitals in Washington state, OMC is losing money. OMC lost a combined $45.7 million in 2022 and 2023, and it is forecast to lose money in 2024 and 2025.

In addition to Medicare underpayment, OMC CEO Darryl Wolfe said increased costs related to labor, equipment and pharmaceuticals have exacerbated OMC’s financial situation.

In its presentation to the board, Chicago-based health care strategy company Juniper Advisory laid out a timeline for exploring and evaluating options and potential partners. The latter might include other community hospitals; faith-based systems; academic medical centers; integrated delivery networks of healthcare providers; and nonprofit and for-profit health systems.

Juniper Advisory has begun soliciting proposals and will bring them to commissioners for review at their Feb. 19 meeting, with a final decision to be made on May 7. Commissioners can decide against proceeding at any point in the process.

The board and OMC leadership identified seven key objectives for any partnership. Among them were positioning OMC as the employer, clinical partner and provider of choice; ensuring its long-term financial sustainability; enhancing its ability to recruit and retain physicians and staff; and strengthening its capacity to make investments in people, programs, facilities and technology.

Commissioner John Nutter said it is important to understand the purpose and objectives of the strategic partnership procedure.

“This is not a selection process, it is an exploration process,” he said. “No decisions have been made. We’re just seeing if there’s a better option out there. It’s what we owe to our community.”

Commissioners will discuss progress on the exploration process at their next meeting at 6 p.m. Dec. 18 in OMC’s Linkletter Hall, 939 Caroline St. Time for public comment will be on the agenda. To view a meeting online, go to tinyurl.com/538m9sbz.

Via press release, Wolfe said, “the fact is, the future of health care calls for innovative approaches to meet patients’ needs.”

“Over the coming weeks and months, Olympic Medical Center will conduct a careful and transparent evaluation to determine if partnering with another organization is the appropriate next step,” he said.

“This is one of many potential paths we are pursuing to achieve our goals.”

Read more about OMC’s efforts to ensure continued access to local care at olympicmedical.org/exploration.

Efforts

During the past 18 months, OMC has made a concerted effort to maximize is revenues and reduce expenses.

It improved its medical coding and billing operations to capture more income, cut back overtime, kept a tight lid on expenses and reduced the number of travelers and other contract workers.

However, it has not been enough the stop or even slow its losses.

“The board is doing this partner process because we have to see what else is out there,” Wolfe said. “There may be some affiliation, some partnership that will help us meet our objectives: keep jobs, keep services and keep access for everybody like we have now. That’s really what we’re trying to do.”

The goal is a solution that will see OMC well into the future.

“We can muddle along for a couple more years, but this isn’t just about the next couple of years, it’s about the next 10 years, the next 20 years,” Wolfe said. “We’re at a really unsustainable position right now.”

OMC’s operating revenue has increased 9 percent since 2019, but its expenses have increased 27 percent over the same time period, according to an audit report prepared by the accounting firm Moss Adams.

OMC cannot turn away any customer — paying, not paying, under the influence of drugs or alcohol, diagnosed with mental disorder — who shows up at its doors. Its leaders also don’t know when it will get paid for providing services nor how much.

OMC has received some relief.

Almost 55 percent of voters in the August primary approved a measure that increased its levy rate from 31 cents to 75 cents per $1,000 of assessed property value that will generate about $12 million a year — about twice the amount it had been collecting.

In 2023, the state Legislature approved increasing funding for the hospital safety net assessment program (SNAP) that reduces the gap between what it costs OMC to deliver care and what it is paid for Medicaid services.

Also in 2023, OMC applied for and received a $458,000 distressed hospital grant from the Washington Health Care Authority.

As Wolfe has continually stressed — to the Legislature, to Congress, to the community — the only solution to OMC’s financial situation is boosting Medicare reimbursements.

The percent of OMC patients relying on Medicare is continually increasing, rising from 60 percent in 2023 to 64 percent this year. At the same time, the number of patients who have commercial — or private — insurance that pays at significantly higher rates than Medicare has fallen.

According to a 2024 Rand study, commercial insurers in 2022 paid an average of 254 percent of what Medicare would have paid for the same services at the same hospital or hospital system.

In the same study, it reported the price paid by commercial insurance for drugs administered in a hospital setting averaged 278 percent of the average sales price compared with 106 percent of the average sales price paid by Medicare for the same drugs.

Hospitals across the state lost a cumulative $3.8 billion in 2022 and 2023, according to the Washington State Hospital Association.

But Medicare reimburses critical access hospitals such as Jefferson Healthcare and Forks Community Hospital at 101 percent of reasonable costs. Large hospital systems such as Providence can absorb Medicare costs much easier than OMC.

Wolfe said he had been visiting Washington, D.C., since 2015 with the same message, but only Rep. Derek Kilmer has been helpful.

“He has gone above and beyond to try to help us,” Wolfe said. “He has tried to make things happen. He’s been fully committed.”

Among Kilmer’s accomplishments was securing $1.2 million for OMC to expand its telehealth services and helping lead the effort to repeal the Centers for Medicare and Medicaid Services’ site-neutral reimbursement policy that will save OMC about $50 million over 10 years. He also pushed for the Rural Hospital Technical Assistance Program Act; legislation to expand a CMS demonstration project, providing cost-based reimbursement for inpatient services at rural hospitals; and legislation to provide sole community hospitals and Medicare-dependent hospitals with updated payments based on real costs.

“Despite all the help we’ve gotten, and despite all the improvements that we’ve made, it’s just not enough to keep up with the rising costs to take care of patients,” Wolfe said.

The trend in the consolidation in hospital systems across the country has been mirrored in Washington state.

In 2010, Stevens Hospital in Edmonds merged with Swedish Health Services. Two years later, Providence Health and Services and Swedish Health Services created a partnership to deliver health care in the Seattle area.

In October, MultiCare Health System in Seattle merged with Overlake Medical Center & Clinics, based in Tacoma.

Some of the moves generated concerns. Partnerships and mergers between Catholic healthcare systems and secular ones, like Providence and Swedish, and CHI Franciscan and Virginia Mason Health System in 2021, raised apprehensions about church doctrine that forbids certain kinds of services, such as physician aid in dying, birth control and abortion.

Wolfe said strategic partnership is not a foregone conclusion. At any point in the process, the board could choose not to proceed. It is also possible no health care organization would have an interest in becoming a partner.

“It’s not a sure thing,” Wolfe said. “At least we can say we’ve tried everything else. It’s our responsibility to find out.”