OMC in crisis, says CEO

In his previous position as Olympic Medical Center’s Chief Financial Officer, Darryl Wolfe said that with just one or two locums — “traveling” health care workers who are contracted to back-fill open jobs — at OMC, “my heart rate would go up.”

Now, as the organization’s top executive, OMC has somewhere north of 75 of those contracted employees.

“That’s how we make this all work,” Wolfe told a group of community leaders at a special meeting at OMC’s medical office building in Sequim on June 16, presenting a somber financial picture of the Olympic Peninsula’s largest healthcare provider.

When creating OMC’s budget for 2023, Wolfe said he and other administrators figured a more healthy picture than the challenges that beset the organization in 2022 that include a surge in omicron COVID-19 infections and led to a $16 million shortfall by year’s end and $12 million this year through May, according to an OMC press release.

The use of locums, which cost about two-and-a-half times as a traditional staffer, has pushed OMC’s personnel expenses from its budgeted target of 62 percent to closer to 73 percent, Wolfe said. The “traveling” staff costs OMC about $300,000 each week, he said.

OMC expects some reimbursement relief in mid-2024 when the recently revamped Safety Net Assessment Program (SNAP) in Washington state is expected to bring in about $10 million more per year in Medicaid reimbursement

But the workforce shortage has persisted, Wolfe said, leading to contracted traveling health care workers in nursing, respiratory therapy, social services, physical therapy and other departments.

“It’s a challenging financial picture at the best of times,” Wolfe told the group last week — an RSVP-only audience that included: Sequim city manager Matt Huish; Clallam County commissioners Mark Ozias and Randy Johnson; Rose Gibbs, Dungeness Valley Health and Wellness Clinic director; Brent Simcosky, Jamestown S’Klallam Tribe health director; Paul Cunningham, chief medical officer for the Jamestown S’Klallam Tribe; Dan Orr, Clallam County Fire District 3 interim chief, and Ann Marie Henninger, an Olympic Medical Center hospital commissioner and registered nurse.

Reducing the number of locums to permanent staff is key, Wolfe said. OMC is Clallam County’s largest employer and currently has 275 open positions from frontline workers such as registered nurses, physicians, and physical therapists to administrative positions in human resources, accounting and information technology (IT).

“This is a good place to live and [we] have a lot to offer candidates,” Wolfe said.

OMC is not alone as hospitals and healthcare systems across the country are pressured by significant financial challenges as they emerge from what the National Hospital Flash Report called the worst year since the start of the pandemic.

The COVID-19 pandemic exacerbated a number of issues, Wolfe noted.

“It was hard everywhere; it has been a long three years for everyone,” he said.

OMC administrators aim for having at least 100 days of operating costs in the general fund, but Wolfe said as of last week it’s closer to 68 days.

“Everybody’s handling the nursing shortage by paying more; that’s the problem,” Cunningham said.

“And I can’t [pay more],” Wolfe said.

About 82 percent of OMC’s revenue comes from federal programs, Wolfe said at a meeting in Port Angeles last week, while the share of its patients who use commercial insurance plans like Blue CrossBlue Shield or UnitedHealthcare that often pay double the rates for hospital services, is shrinking.

“There are not a lot of options,” he said Friday in Sequim. “We have a lot of headwinds.”

Phased approach

Wolfe said OMC is looking at a phased approach to getting a handle on the financial situation. The first, initiated a month ago, he likened to a “back to basics” and “management 101” approach. If staffers have no patients, he said, they go home.

There will be a hiring freeze in some areas, some system upgrades will be put on hold and some departments will simply see less funding, he said, though that won’t mean cutting on some expenses: “We can’t just stop replacing equipment; we have to maintain that cycle,” Wolfe said.

He added that OMC will look at restructuring the organization’s debt with lending institutions.

“We have to slow certain costs,” he said. “This won’t be forever.”

Phase two, to be instituted in July, would look to condense and restructure some services that are offered in both Sequim and Port Angeles, which could mean shifting of staff between the two cities, Wolfe said. That wouldn’t mean ceasing services but “modulating” them to save on expenses.

A possible approach, OMC officials said in a press release, is to reduce operating hours of a service that is less busy or has days that are less busy.

“I don’t know what that looks like yet,” Wolfe said at the Sequim meeting. “We have a lot of redundancies in our system.”

A possible third phase, with no timetable given, would include a word Wolfe even hesitated to mention at the meeting: layoffs.

“We have to stay open; we have to stay viable,” Wolfe said. “We’re in a tough spot.

“I don’t want people to panic; [I’m] trying to be very cautious.”

In listing the stresses on its finances, Wolfe briefly mentioned but did not address in any detail the litigation involving OMC and events that allegedly took place in its emergency room last year.

“We had a very unfortunate thing happen in the ER, but it’s worth mentioning that we have a huge liability around the legal case that’s cost us over $1 million,” Wolfe said at a meeting the previous day in Port Angeles. “That didn’t help us.”

That incident involved emergency medicine physician, Josiah Hill, who worked in the ER when it was operated by Peninsula Emergency Services (PESI). Hill has been charged with five counts of indecent liberties by a healthcare provider and one count of second-degree rape.

Three of the women who have alleged Hill assaulted them have filed lawsuits against Hill or OMC.

OMC did not renew PESI’s contract and hired Sound Physicians of Tacoma to provide emergency room physicians, as well as contract with MedStream for anesthesiologist services.

Seeking solutions

At the Sequim meeting, Henninger said fewer and fewer people are resupplying the pool of candidates for nurse and doctor positions.

“We need more faculty and slots for students in healthcare,” she said.

Ozias said OMC could look at partnering with another organization if they receive better reimbursement rates for certain services.

Wolfe was asked about other funding sources, including floating a tax proposal to the public.

The OMC CEO said that plan may be a non-starter.

“What would it take and would it pass?” Wolfe asked rhetorically. “I don’t know if the juice is worth the squeeze.”

He said OMC isn’t looking to “get rich” but to “get back to break-even … and replace reserves, to some degree.”

Wolfe said the organization is fortunate to have great support from legislators and community leaders.

“Everyone’s pulling for us,” he said.

Bobby Beeman, OMC’s director of marketing and communications, said OMC is looking to offer some broader, public forums, both in-person and online, in the next couple of weeks; see for updates.

Cunningham said this is a familiar conversation around the country, with hundreds of rural hospitals closed or on the brink.

“This is a systemic thing,” he said. “[But] we have so much going for us in this community.”

Peninsula Daily News reporter Ken park contributed to this story.