Dogged by debt, hospital district must clear its books before merger with PeaceHealth

San Juan Island
San Juan Island's hospital district must secure $800,000 over the next 16 months to retire debt and to finance a one-time insurance payment in order to close the doors of Inter Island Medical Center and merge with PeaceHealth.
— image credit: File photo

The clock is ticking and the San Juan Island hospital commission has big business to attend to and, at least at this point, not a lot of options on the horizon.

The business at hand, according to Beth Geiger Williams, director of Inter Island Medical Center, is to find a way to clear roughly $500,000 in financial obligations from the medical center’s books before the hospital district joins forces with PeaceHealth and shuts down its operations at the medical center.

She said that PeaceHealth, which is slated to break ground at the site of its critical access hospital July 23, expects construction to be completed by December 2012. As part of its contract with PeaceHealth, the district is obligated to be debt free at the time of that merger, she said.

The district, she noted, also must make a one-time insurance payment of roughly $300,000 to cover any future liabilities from past patient care at IIMC.

“We’ve spent the last three to four months dealing with the debt and figuring out how to end operations over the next 16 months,” Williams said.

A sluggish economy hasn’t helped.

A two-plus year decline in patient numbers has combined with rising costs and lower reimbursement rates, particularly for Medicare, the single-largest patient category at IIMC, which provides reimbursement for  roughly 80 percent of its costs, to put the medical center in the hole.

“Our issue always has been that we provide a lot of services without full reimbursement,” Williams said.

The hospital commission historically has relied on a line of credit to help cover expenses and supplement the revenue the medical center receives from the district’s annual property tax levy. Property tax revenue arrives just twice a year, however, and the medical center can fall behind, particularly if patient volumes drop.

Commission Chairwoman Lenore Bayuk said patient volumes recently began to pick back up. At its June 15 board meeting, the commission put an end to a series of employee furloughs to help manage the rise in patients and an increased workload. The commission is also seeking to fill the position of a physician who recently resigned and has three qualified candidates from which to chose.

Still, Bayuk said an uptick in patient volume won’t generate the amount of revenue the district will need to amass over the next 16 months. And the commission will be looking for solutions when it meets July 20.

“Our whole focus at the moment is how to go about paying back that debt,” Bayuk said. “It really has to do with finishing up our business here.”





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