State Audit Again Warns of Financial Risks at Olympic Medical Center

The Washington State Auditor’s Office has again warned that Olympic Medical Center’s declining financial condition puts the Clallam County hospital district at risk of being unable to meet its obligations or maintain current levels of service.

The accountability audit, published Sept. 17, 2026, covers the 2024 calendar year. Auditors also reviewed more recent financial information, including 2025 figures audited by a firm of certified public accountants.

Olympic Medical Center, formally Public Hospital District No. 2 of Clallam County, serves Port Angeles, Sequim and surrounding communities. It operates Olympic Memorial Hospital, a general acute-care facility licensed for 126 beds, along with physician clinics, cancer care, imaging, rehabilitation and home health services.

Operating Losses and Limited Cash

The district has reported operating losses since 2022, according to the report. Losses totaled $27.9 million in 2023, $13 million in 2024 and $15.4 million in 2025. Auditors said those losses significantly affected the cash available to meet the district’s obligations.

Using unrestricted cash and investments, auditors calculated that the district had enough available cash to cover five days of operating expenditures at the end of both 2023 and 2024.

That figure increased to seven days at the end of 2025.

The state report also says a separate audit of the district’s 2025 financial statements included an emphasis-of-matter paragraph describing “substantial doubt about the District’s ability to continue as a going concern.”

Auditors attributed the financial strain to limited opportunities to increase revenue and payments that have not kept pace with the cost of care. 

The district generally spends more to provide services to Medicare and Medicaid patients than it receives from those programs, the report says. Higher payments from commercial and private insurers historically helped cover that gap, but those payments have not kept pace with rising costs.

Bond Requirements Not Met

Auditors also reported repeated failures to meet minimum debt-ratio requirements for the district’s 2018 general obligation bonds. 

Those bonds represented about $15 million of the district’s $44.2 million in outstanding bond debt in 2024.

The report says the lender had not exercised its rights to remedy the default but retained the ability to do so at any time. 

Auditors warned that noncompliance with bond covenants could leave the district facing a higher interest rate or having to repay bonds on short notice.

The auditor’s office reported the financial-condition issue in its previous two audits.

The District’s Response

In its written response included in the report, the district said it had implemented initiatives that reduced expenses, improved operational performance and increased financial stability. 

It cited increased property tax levy support, efforts to manage supply expenses, reductions in purchased services and contract labor costs, and a focus on “mission-critical services.”

The district said it continues to evaluate strategic partnerships and other long-term options while working to improve its financial position and maintain local access to care.

In its update on the 2023 finding, included in the new report, the district listed corrective action as “partially corrected.”

Auditors acknowledged that the board and management are taking steps to improve the district’s finances. They nevertheless renewed their recommendation for a formal, written, comprehensive plan to address its financial condition, along with continued evaluation and close monitoring of financial operations.

Other Audit Results

The accountability audit also examined general-ledger and payroll software conversion, gross wages and overtime, and compliance with requirements for public meetings, minutes and executive sessions.

In most areas examined, auditors said district operations complied in all material respects with applicable state laws, regulations and district policies, and provided adequate controls to safeguard public resources. 

The report notes that auditors did not examine every transaction, activity, policy, internal control or area of operations.

The auditor’s office said it will review the district’s corrective action during its next audit.