Washington health system in talks to form affiliation with struggling hospital

Olympic Medical Center, a rural health system in northwestern Washington state, is talking with UW Medicine about a potential partnership.

UW Medicine is in talks with Olympic Medical Center in Port Angeles, Washington, about forming an affiliation. Brad Simmons, president of UW Medicine Hospital & Clinics, and Ann Henninger, president of Olympic's board, at the signing of a letter of intent to explore an affiliation.

UW Medicine and Olympic signed a letter of intent last week to explore an affiliation. Based in Port Angeles, Olympic is anchored by a 67-bed hospital and offers clinics and outpatient services.

An academic medical system based in Seattle, UW Medicine serves Washington, Wyoming, Idaho, Montana, and Alaska.

Olympic has been facing financial difficulties in recent years and has been exploring the possibility of finding a partner. In a news release, Olympic said the two organizations are looking to examine the feasibility of an “affiliation model.”

“As the next step, OMC and UW Medicine will conduct a financial and operational assessment of OMC to provide an in-depth study of opportunities for growth and readiness for affiliation,” Olympic said in a news release.

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Brad Simmons, president of UW Medicine Hospital & Clinics, attended an Olympic board meeting last week to sign the letter of intent.

The two organizations disclosed in August that they were beginning talks. Simmons said in August that he was “excited about the potential opportunity to affiliate with Olympic Medical Center.”

“We understand the importance of patients having access to high-quality care close to home, and we look forward to seeing how we may be able to work together to ensure care remains local,” Simmons said in August.

Olympic said the due diligence period will involve transparency and respect for the mission of both organizations.

“By the end of this phase, our goal is to develop strategic and operational recommendations based on the financial and operational assessment, aiming to achieve shared alignment on a proposed affiliation model,” Olympic said in the news release.

Discussions between health systems about potential partnerships typically last several months. Susan Gregg, a spokeswoman for UW Medicine, said via email Friday that the due diligence phase will follow a similar timetable.

“We are working with Olympic Medical Center on an assessment phase that will last several months,” Gregg said.

Ann Henninger, president of Olympic’s board, said in August that there is much work to be done, but the board views UW Medicine as “the right organization for us to move forward with in this exploration process.”

Darryl Wolfe, then-CEO of Olympic Medical Center, outlined the system’s serious financial problems during a panel discussion with the Washington State Hospital Association in March.

Wolfe said the hospital was facing an “unsustainable situation,” with a sharp drop in its cash on hand. He said in March that the hospital was weighing the possibility of merging or partnering with a larger provider.

Without a suitable partner, “we will have to make radical cuts,” Wolfe said. He said the sobering measures could include reducing the number of beds, which he said would be devastating for a critical access hospital.

Wolfe recently announced his resignation, citing personal reasons, the Peninsula Daily News reported.

In August, Olympic Medical Center welcomed Mark Gregson as the interim chief executive officer of the system. The system said Gregson will serve solely in an interim capacity while the medical center’s board searches for a permanent CEO.

Many hospitals in Washington state are dealing with dire financial challenges. Even with some modest improvements a year ago, 70% of Washington’s hospitals and health systems are continuing to lose money from operations, the state association says.

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