OMC anticipates $3.4 million in losses after Medicare reimbursement changes

As Olympic Medical Center leaders warned, cuts in reimbursements from the Centers for Medicare and Medicaid Services (CMS) are moving forward next year and will significantly impact the hospital.

OMC CEO Eric Lewis said on Nov. 2 he learned of CMS’s approval for cutting 60 percent of reimbursements to off-site hospital outpatient departments, such as Sequim’s campus and the Primary Care Clinic in Port Angeles, which are both more than 250 yards from their main hospital — in this case OMC’s main hospital in Port Angeles.

OMC staff estimate cuts will cost the hospital $3.4 million over two years and up to $47 million over the next decade.

“CMS made the worst decision I have seen in my career even though Clallam County residents, community organizations, employees and providers sent in 1,780 letters to CMS to make the case that local health care is important to Clallam County,” Lewis said in a press release.

Off-site campus reimbursements would fall from $118.35 per visit to $47.34 per visit, hospital staff estimate.

Lewis said in an interview that CMS is phasing in the reimbursement cuts at 60 percent between 2019 and 2020, but it’s “still a major hit.”

“We will not give up without a fight, however, and we appreciate the outpouring of support our community has shown to OMC,” he said in the release.

Lewis said his first course of action is working with federal legislators to reverse the decision.

“I consider this very bad policy at the national level and it is quite concerning that leaders of CMS have implemented this policy,” he said.

Tom Nickels, executive vice-president of the American Hospital Association, said in a press release that his association and other hospitals look to challenge the decision in court because congress voted in 2015 to protect existing facilities from unwarranted payment reductions.

“This rule also ignores the real and crucial differences between hospital outpatient departments and other sites of care,” Nickels said. “According to a study conducted by KNG Health Consulting released in September, patients who receive care in a hospital outpatient department are more likely to be poorer and have more severe chronic conditions than patients treated in an independent physician office.”


In a Sept. 5 guest opinion piece in the Sequim Gazette, Lewis said the cuts match site-neutral policies with the rate paid to “free-standing” or independent physician practices. These cuts don’t work in rural areas, however, because local free-standing physicians couldn’t operate at such a low Medicare reimbursement, Lewis wrote.

Because of the cuts, Lewis said that the area’s shortage of health care providers could become worse and emergency room visits could increase because of the lower reimbursement rate.

About 60 percent of Port Angeles’ hospital patients use Medicare, OMC staff estimate.

The Peninsula Daily News reported that in CMS’ proposal one of the reasons for the cuts was because many hospitals purchased private-practice clinics and offered the same services that had been offered before while receiving more in Medicare/Medicaid reimbursements.

Lewis told the PDN that OMC is regulated more than private care providers and the must see and care for all Medicare patients.

‘Work in progress’

Lewis said his staff began reevaluating OMC’s 2019 budget on Oct. 5 after last week’s announcement.

“It’s a work in progress,” he said.

“We’re going to look at our capital spending. Our goal was to expand services in Sequim and hire more employees and expand primary care. But now we’re not going to be able to do as much spending in Sequim as we like.”

What specifically is to be determined, he said, tentatively by OMC’s board of commissioners’ meeting on Nov. 21.

New bids for the Olympic Medical Cancer Center end by Nov. 15, too, which Lewis said they’re committed to expanding.

Overall, Lewis and staff and commissioners will carefully and thoughtfully look at capital spending and the operating budget, he said.

“We like, everyone will have to spend less, which is unfortunate because our community needs more health care access,” Lewis said.

OMC’s partnership with the YMCA of Sequim, Wellness Services, focusing on preventative measures for people with a range of issues from balance issues to chronic diseases, is a program he and commissioners are committed to continuing and growing, he said.

“We’re going to have look through everything,” Lewis said. “When we make a proposal, it’ll be thoughtful.”

Sequim’s campus hosts the Olympic Medical Cancer Center, the Specialty Clinic, Olympic Medical Sleep Center, Orthopedic Clinic, Primary Care Clinic, and Walk-In Clinic.

For more information about Olympic Medical Center, visit

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