By Ann McCreary
Three Rivers Hospital is beginning a search for a new chief executive officer after CEO Bud Hufnagel announced last week he will resign April 30, 16 months before his current two-year contract with the Brewster hospital ends.
His resignation comes after several hospital commission meetings during which emotions ran high over proposals developed by Hufnagel, at the request of hospital commissioners, to cut staff and services in an effort to stabilize the hospital’s financial condition.
A proposal to eliminate labor and delivery services generated strong opposition from staff and community members. The hospital’s commissioners last month chose to maintain the maternity unit, which Hufnagel described as “a loss leader.”
Seven doctors affiliated with Three Rivers Hospital submitted a letter last month expressing lack of confidence in hospital administration and calling for Hufnagel’s resignation.
Hufnagel said this week that his decision to step down in April is unrelated to the criticism he has come under for the changes he proposed and for his leadership style.
“That’s nothing but chaff,” Hufnagel said. “What you’re watching is a small group of people … that have latched on to an emotional issue with no basis in fact. They prefer to shoot the messenger, and I’m perfectly fine with that. I’ve been doing this a long time. It wasn’t a surprise to me that some people are going to get upset.”
Hufnagel was hired in 2011 for a two-year contract, which was renewed last year, to conduct a “turnaround” of Okanogan-Douglas District Hospital, subsequently renamed Three Rivers Hospital. Hufnagel, who has a home in Mazama, has a 35-year background in the health care industry and in consulting for health care facilities.
He said this week that decisions made by the hospital commissioners have made it difficult to achieve the turnaround he was hired to do, and said the hospital will continue to rely on loans from Okanogan County to operate.
“We provided the best information we could. The board decided to keep maternity and we’re still in a difficult financial situation. As long as you have maternity, which might be a good service to the community, the question remains, how are you going to pay for it?” Hufnagel said.
OB loses money
Rural hospitals like Three Rivers, with a high proportion of Medicaid and self-pay patients, lose money on maternity services because they lack enough patients with commercial insurance to provide adequate compensation, Hufnagel said. “Hospitals simply don’t get paid enough for OB [obstetrics] to be profitable,” he said.
Three Rivers promotes itself as one of a handful of hospitals in the state certified as “Baby Friendly” under an international program that encourages maternal/infant bonding.
Hospital commissioners indicated they would “revisit the whole scenario in April,” Hufnagel said. “But at the end of the day, to me it was pretty clear the board wants to go that path. They understand we’re losing money on OB and losing money on every baby born in the hospital, because the majority are Medicaid babies.”
“We’re not going to be able to do the turnaround. We’re not going to be able to reduce the [county] warrants,” he said.
The hospital has been unable to sustain itself financially for more than a decade, relying on loans, called warrants, from Okanogan County to support operations. Three Rivers has been in debt by as much as $3.2 million, and currently carries about $2 million in warrants from the county.
“There’s this attitude toward the warrants that it’s free money, but in reality it’s taxpayer money,” Hufnagel said.
Hufnagel said he has explored developing affiliations with other medical centers in the region, including Confluence Health in Wenatchee and Lake Chelan Community Hospital. He said those partnerships won’t happen until the hospital achieves financial stability.
Cuts and changes
During the past two months commissioners have approved measures that will eliminate 18 full-time-equivalent positions in the hospital; downgrade the hospital’s emergency room from a Level 4 trauma facility, which means a surgeon is on-call within 30 minutes at all times, to a Level 5 facility without an on-call surgeon; sell the hospital’s HealthBeat Fitness center and a medical equipment department; temporarily suspend the hospital’s cardiopulmonary rehabilitation program; and create an urgent care clinic at the hospital.
Mike Pruett of Winthrop, a member of the hospital board, said Hufnagel’s resignation “is moving the timetable up” on his contract.
“He wasn’t signing up to be here the next 15 years. He was hired to help us with the issues facing the hospital and the change in rural health care. It hasn’t been easy and it hasn’t been pretty in some cases,” Pruett said.
The changes in hospital services recommended by Hufnagel and approved by commissioners are “courageous and bold moves,” Pruett said. “To think we could continue with the status quo is like the ostrich sticking its head in the sand, and Bud is not that person.”
The debate over the hospital’s future prompted “a lot of animosity and a logjam going on with communication. Maybe this was the tipping point,” Pruett said. “For the good of the hospital and to move forward, now is maybe a better time for someone to come in … to take the hospital forward and be involved for many years.”
Hufnagel said his focus during his remaining four months will be assisting the hospital board in its search for a new chief executive and working toward creating a new urgent care clinic within the hospital.
Three Rivers Hospital serves a district that includes the Methow Valley from Mazama to Pateros, as well as the communities of Brewster, Bridgeport and Mansfield. It is supported in part by property taxes.
