No swing beds, no inpatient care, but an open hospital in Ritzville? East Adams plans for future amid closure threat

East Adams Rural Healthcare plans to slim down its services to stay open and retain emergency health care in Ritzville.

The plan presented Thursday night would change East Adams from a critical access hospital to a rural emergency hospital – a Centers for Medicare & Medicaid Services designation hospital leaders say could net the hospital an additional $3.4 million from the federal government.

In exchange, the hospital would need to shed its inpatient care and swing beds, which are meant to keep people in the same facility after moving from acute treatment to rehabilitation.

“We’re asking you to give up your inpatient and swing beds in exchange for economic viability going forward and assurance that emergency services and the emergency department will be secure moving forward,” said hospital Chief Financial Officer Viola Babcock.

The board has previously claimed former hospital administrators kept them in the dark on hospital finances while hiding $13.4 million in losses in the past three years. In November, the hospital gave notice to the state they could close as soon as January.

At the Thursday meeting, Babcock said the hospital had “more than enough to stay open” through January even as they face a “$5 million albatross” of short-term debt they cannot pay back.

The rural emergency hospital designation was created in 2023. A hospital under this designation is allowed to provide emergency department services and observation care. Any additional outpatient services cannot exceed an annual per patient average length of stay of 24 hours. A rural emergency hospital is prohibited from providing most inpatient services.

The designation was created as a way to prevent closure of the most rural hospitals in the country. Only 43 hospitals across the United States have switched to this model so far. If East Adams approves their plan to make the switch, they would be the first hospital of this kind in Washington state.

“Critical access hospitals across the country have failed, which is why the federal government set up this designation,” said hospital district board member John Kragt. “This model just makes sense in low traffic areas and populations that have a high usage of the emergency room.”

According to Kragt, an average of 111 patients use the emergency room each month but use for other services was low. While former leadership told them their swing bed program was very successful, it was actually losing the hospital money.

Swing beds are transitional care that “swing” from different levels of care based on patient need. They typically provide extended in-hospital care after an acute crisis has ended. But according to Kragt, their program had just a daily census of one patient last year.

Board member Eric Walker said the REH designation would require layoffs and downsizing but did not estimate how many employees could be affected.

Because East Adams is the first hospital to pursue REH status in Washington, they require approval from the state, which would need to set up rules and operations to oversee a rural emergency hospital. They hope the state Attorney General can sign a 30-day emergency order in January to allow the hospital to begin operating under the new status.

The hospital district board also proposed two hospital levy increases to the February 2026 ballot. If they are approved, the increased levy funds would be available to the hospital beginning April 2027.

Together, the two levy increases would net the hospital an additional $500,000 of revenue in 2027.

Kragt said that while the hospital may not see dividends from the levy until the year after next, approval of the tax increase would show the hospital was on better financial footing.

“We can pursue asking for an increase on our current levies that we can maybe leverage in the short time with our vendors and our community partners who want to see stability,” he said.

Community member Joyce Preston told the commissioners that she “thinks” the community will support the levy increases but it will be “really scary and really hard to convince us that’s the thing we need to do.”

Preston said she feels little trust for the board after they allowed previous hospital administrators to delay audits for years on end.

“An audit protects our medical facility, our community and the board. I can’t understand,” she said. “How do we re-establish that trust? How do we know the board is going to be doing the right thing?”

The first reference to missing audits in minutes of the hospital board meeting was in January 2024 when then-Chief Financial Officer Matt Gosman said they were behind schedule on their 2021 and 2022 audits because of “staff and system changes causing complications,” meeting minutes show.

Audits again came up at the June 2024 meeting from board commissioner Eric Walker, who then raised the issue in each following meeting. In October that year, Gosman claimed the hospital’s accounting firm had “pushed the deadline” because of other “more pressing audits.”

In January 2025, Gosman said the 2022 audit would be presented at the next meeting. The audit was promised to be presented at the next meeting at each subsequent meeting through May this year, minutes show.

As Spokane Valley-based DZA Accounting was continually blamed for the delays, the commissioners became increasingly upset with the firm. In the March meeting, board member Riley Hille asked how the hospital could “hold feet to the fire” to get the audits. In response, CEO Corey Fedie suggested the hospital should take bids for a new auditing firm.

In his May report, Fedie claimed the hospital was “on a good track financially.” Later that month, Gosman resigned as part of a move to Wyoming and Babcock was hired as interim CFO.

By the next month, Fedie no longer claimed the hospital to be in a good financial position, stating East Adams needed to “evaluate ways to increase revenue and decrease costs.”

Fedie was placed on administrative leave on Aug. 15 and later fired. In their September meeting, the board opened an investigation into the “business conduct by the CEO and previous CFO.”

At the same time, the administrators had reported the hospital breaking even, but the DZA audit showed losses at the hospital tripling between 2022 and 2023.