IS PACIFIC MEDICAL CENTER on the ropes, facing a financial knockout?
Still performing: PacMed's former headquarters on Beacon Hill.
Three top executives resigned last year, seven clinics were closed in the past two years, and the health provider has suffered $83 million in operating losses since 1994.
Now, due to its cloudy past, PacMed's future is in doubt, according to state auditor Brian Sonntag.
"The ability of the authority to continue in operation is unclear," says Sonntag's audit of PacMed, released last week. It raps the health provider for wrongful spending practices, including writing off millions in assets that were actually worth nothing, and for giving away public funds as "gifts" to top executives.
Sonntag says he's unable to get a true reading of PacMed's condition because the agency's outside audit for 2000 remained uncompleted as of last month.
Arthur Andersen, the firm under fire in the Enron scandal, is performing the audit.
As Seattle Weekly reported last month (News Clips, "Seattle & Enron," Jan. 24), city officials were worried about Andersen's PacMed work in the wake of the energy giant's bankruptcy.
Sonntag now says they should be worried: Because its annual audits are habitually late, PacMed—run by a city-regulated public development authority (PDA)—can't effectively manage its six-clinic operations and the city can't properly oversee them.
City Finance Director Dwight Dively was on vacation this week, but he and other officials earlier indicated that PacMed's status was under review.
Formed by the city and King County in 1981 to serve patients with limited access to health care, PacMed has 700 employees and a budget of $151 million. Members of its ruling council are appointed in part by the mayor and county executive.
In a statement, PacMed officials blame delays on claims disputes and say operating losses have been offset by subsidies and other income (such as the partial leasing of its Beacon Hill facility to developer Wright Runstad, which subleases to Amazon.com). They claim a $19 million bank balance.
In his audit, Sonntag was especially critical of PacMed's payment of executive bonuses that could be a wrongful giveaway of public funds.
The provider doled out $75,000 to CEO William Riley and $48,200 each to CFO Lyn Loven and COO Jeffery Robert in 2000.
The PDA council's leadership approved Riley's bonus without the necessary supporting documents required to justify the payments, Sonntag says.
Riley approved the bonuses of his two fellow execs for meeting their strategic goals. But again, the state found "no evidence to support that these goals had been achieved."
Sonntag, who says PacMed wrote off $4 million in worthless assets that included equipment that may have been stolen, was unable to complete a full review due to the executives' departures early last year. No reasons for the resignations were given, but a new management team is now in place.