Olympic Medical Center gives OK to $20 million expansion loan

By Rob Ollikainen
Peninsula Daily News

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PORT ANGELES — Olympic Medical Center has taken out a $20 million loan from KeyBank to pay for campus expansion and new medical equipment.

The seven commissioners approved by unanimous vote Wednesday the limited tax general obligation bond debt.

“The interest rate is 3.69 percent, which is locked for 10 years,” Chief Financial Officer Julie Rukstad said.

“It is a 25-year amortization with a funding date of Dec. 6.”

The loan will be used to expand the hospital’s cramped emergency room by 3,500 square feet and to build a 27,500-square-foot medical office building near the hospital and a 22,500-square-foot outpatient surgery center in Sequim.

It also will be used to purchase 3-D mammography machines and other medical equipment.

The emergency room will be expanded from 14 exam rooms to 22 in the second half of 2014.

Center construction

The Port Angeles medical office building and Sequim surgery center will be constructed in 2015, hospital officials have said.

Commissioners also adopted a $147.3 million 2014 budget that projects $3 million in revenue and a 2 percent profit margin. The budget assumes a 2 percent increase in inpatient volume and a $1.6 million reduction in uncompensated care.

OMC, which treats every patient regardless of their ability to pay, will spend $9 million on bad debt and charity care this year and a projected $7.4 million next year.

Sweeping changes in the health care industry resulted in a “best guess” budget for 2014, Rukstad said.

“It’s certainly a rapidly changing environment,” added Commissioner John Nutter, who sits on the budget committee.

“I hope we can make a 2 percent margin next year, but I certainly don’t think anything’s a given at this point.”

Commissioner Jim Cammack raised the possibility of revising the budget as the year goes along.

“Our entire reimbursement structure is so fluid and changing so rapidly that I think even budget revisions can’t keep up,” Nutter said.

“We set kind of an overall goal of ‘This is what we’re trying to accomplish for the entire year.’ Individual pieces are guaranteed to change.”

Chief Executive Officer Eric Lewis said OMC will absorb $3.5 million in Medicare cuts in 2014 because of the Affordable Care Act, federal budget sequestration and other factors.

“In looking at the [federal] budget, there’s large proposals to continue to cut Medicare reimbursement,” Lewis said.

“We definitely think further cuts in Medicare are not warranted. We’ve already taken significant cuts.”

Patient treatment

Medicare, which pays OMC about 83 percent of what it costs to treat a patient, accounts for 57.6 percent of OMC’s payor mix.

To that end, commissioners approved a form letter that will be sent en masse to the North Olympic Peninsula’s congressional delegation, urging lawmakers to stop cutting payments to medium-sized rural hospitals.

“We’re just going to keep sending letters to try to get their attention,” Lewis said.

Rukstad said it was difficult to make budget assumptions for 2014 because of all the uncertainties in health care.

“It’s going to be an interesting year,” she added.

Commissioners also voted to approve the 1 percent property tax levy increase from this year’s levy amount.

Levy total

The increase will generate an additional $38,520 and bring the levy total to $3.89 million.

“Tax increases are always a hot topic, regardless of who you’re talking to or where you are,” Nutter said.

“At least on behalf of the budget committee, we are deeply appreciative of the tax support we get from the community. I don’t take it lightly that we’re increasing taxes 1 percent.

“While I feel sorry asking [taxpayers] for more, I’m somewhat tempered in my thought by the fact that at the end of the day, it’s not a huge burden on any individual.”

Nutter said the levy increase will cost the owner of a $150,000 home about 80 cents a year, all of which goes to paying for uncompensated care.

Earlier in the meeting, Rukstad reported that low patient volumes resulted in a $1.37 million hit to OMC’s bottom line in the third quarter of 2013.

“It was a negative quarter, but it was better than the second quarter,” Rukstad said.

For the year, OMC was $4.85 million in the red as of Sept. 30.


Reporter Rob Ollikainen can be reached at 360-452-2345, ext. 5072, or at rollikainen@peninsuladailynews.com.

Last modified: November 21. 2013 5:27PM
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