The special study of the Pacific Medical Center (PacMed) Interlocal Agreement was initiated at the request of the Metropolitan King County Council and included in the council-adopted 1999 Auditor’s Office work program. PacMed is a preservation and development authority (PDA) chartered by the city of Seattle. Under the bond issue approved by King County voters in November 1987, PacMed received approximately $9.3 million to accomplish structural improvement to its primary facility located on Beacon Hill within the city of Seattle. King County and PacMed have an interlocal agreement that defines the rights and duties of the respective parties regarding the accomplishment of the project and the use of the bond proceeds.

The objective of the special study was to evaluate PacMed’s compliance to the provisions contained in the interlocal agreement with King County. The study focused on use of the bond proceeds, medical-use-only restriction on a portion of the Beacon Hill facility, and the arrangement to provide "charity care" at not less than the level demonstrated in 1988. The study also reviewed the adequacy of King County’s oversight and monitoring of the interlocal agreement provisions.

The general study conclusion is that the executive and the Department of Public Health (DPH) need to strengthen the oversight of the interlocal agreement to provide assurance that PacMed has complied with all key provisions of the interlocal agreement since it was signed in early 1991.

PacMed transmitted the final project proposal to King County in March 1990. The final proposal was primarily to accomplish the seismic stabilization of the existing building through construction of the north tower addition as shell space only. The project was completed in August 1994 at a total cost of $12,391,938, of which $10,286,946 was the county share through the bond proceeds and interest thereon. Based on the audit staff review, the project appears to have been completed in accordance with the overall final project proposal, and the bond proceeds appear to have been used for appropriate project purposes.

Finding 3.  The executive and the Department of Public Health need to strengthen monitoring of PacMed’s compliance to the charity care provisions specified in the agreement.

In exchange for the bond proceeds, PacMed agreed to provide "charity care" to indigent and low-income patients at no less than 1988 level. A committee charged with the responsibilities for oversight of the charity care provision was envisioned in the interlocal agreement but never established. No charity care reports were received by the county for 1991 through 1994. In 1996, Executive Internal Audit issued a report pointing out the lack of oversight. Subsequently, Community Oriented Primary Care Division (COPC) of DPH was assigned the oversight responsibility. However, COPC did not request charity care reports until April 1998 and, upon receipt, accepted the reports although they did not contain all the required information.