The State Auditor’s Office issued a renewed warning on September 17, 2026, stating that Olympic Medical Center is facing a deteriorating financial situation that threatens its ability to sustain current service levels and fulfill its financial duties. This accountability audit focuses on the fiscal year 2024, though it also incorporates 2025 data that was previously examined by a certified public accounting firm.
Olympic Medical Center, also known as Public Hospital District No. 2 of Clallam County, provides healthcare services to residents of Port Angeles, Sequim, and nearby areas. Its operations include Olympic Memorial Hospital, a 126-bed acute-care facility, as well as outpatient clinics, cancer treatment, diagnostic imaging, rehabilitation, and home health programs.
The district has posted operating deficits since 2022. Financial records show losses of $27.9 million in 2023, $13 million in 2024, and $15.4 million in 2025. According to the auditors, these deficits have significantly depleted the cash reserves available for the district to meet its liabilities. Based on unrestricted cash and investments, the district possessed enough liquidity to cover only five days of operating expenses at the close of both 2023 and 2024. This buffer improved slightly to seven days by the end of 2025.
A separate examination of the 2025 financial statements included a specific note highlighting "substantial doubt" regarding the district’s viability as a continuing entity. The auditors cited limited avenues for revenue growth and reimbursement rates that lag behind the actual cost of care as primary drivers of the strain. The district typically incurs higher costs than it recovers from Medicare and Medicaid patients. While commercial and private insurance payments historically offset these gaps, those payments have failed to keep up with rising operational costs.
The report also details ongoing failures to satisfy minimum debt-ratio conditions attached to the district’s 2018 general obligation bonds. These bonds accounted for approximately $15 million of the district’s total $44.2 million in outstanding bond debt as of 2024. Although the lender has not yet invoked remedies for the default, it retains the right to do so at any time. The auditors cautioned that a breach of these bond covenants could result in higher interest rates or a demand for immediate repayment. This financial concern has been flagged in the auditor’s office’s two previous reports.
In its written reply, the district stated that it has launched initiatives to cut expenses, enhance operational efficiency, and bolster financial stability. These measures include securing greater support for the property tax levy, controlling supply costs, reducing spending on purchased services and contract labor, and concentrating resources on essential services. The district indicated it is still assessing strategic partnerships and other long-term strategies to improve its fiscal standing and ensure local access to care.
Regarding the 2023 finding, the district listed its corrective actions as "partially corrected." While the auditors recognized that the board and management are taking steps to improve the financial outlook, they reiterated their recommendation for a comprehensive, written plan to address the district’s condition. They also called for continued close monitoring of the district’s financial operations.
A recent accountability audit evaluated the school district’s financial software transitions, specifically regarding general-ledger and payroll systems. The review also assessed gross wages, overtime payments, and adherence to state mandates concerning public gatherings, record-keeping, and closed-door meetings.
Auditors concluded that the district largely complied with relevant state statutes, regulations, and internal policies in most examined areas. They determined that existing controls were sufficient to protect public assets. However, the report clarified that the review did not cover every single transaction, activity, or operational area.
The auditing office stated it will evaluate the district’s progress on implementing corrective measures during its next scheduled review.