Bay Area Hospital in Coos Bay owes $3 million to Medicare to repay money it received for a program it didn't actually qualify for.
The nonprofit hospital hosted medical residents from Oregon Health & Science University for more than a decade. Medicare helps hospitals cover the cost of training residents, but it generally limits how many residents each hospital can claim.
Hospitals can adjust those limits through written agreements filed with Medicare. Bay Area Hospital officials said no such agreement was in place with OHSU, even though the hospital claimed Medicare reimbursement for the residents.
“Unfortunately, it's going to require paying back CMS [Centers for Medicare and Medicaid Services] about $3 million for amounts erroneously claimed on the cost report,” Chief Financial Officer Patrick Banks told the hospital board Tuesday.
The repayment will push the hospital’s loss for fiscal 2026 from about $6 million to $9 million.
Banks said the hospital properly filed paperwork documenting the residents’ work. But the agreement needed to receive Medicare reimbursement was missing.
He said hospital leaders at the time appeared to believe the money was coming.
“Why else would you pay OHSU for a resident if you didn't believe that there was going to be some reimbursement on the other side?”
CEO Gretchen Nichols said previous hospital leaders expanded the program to include more residents, potentially triggering the mishap.
“Not only did they pay for the residents, but then they expanded the program and paid for more residents, and they paid administrative costs to OHSU,” she said.
The CEO who oversaw the arrangement has since left the hospital, and Banks said the consultant who helped set it up has died.
The residency program ended in June.
Bay Area Hospital has struggled financially in recent years, prompting major leadership changes in 2025. Banks took over the finance job in November and has been combing through the hospital’s books since.
Nichols warned the board that the review could uncover other problems.
Still, Banks said the hospital has posted an operating surplus for nine months in a row. He said the $3 million repayment will not affect hospital operations.
“It is a kick in the shins,” Banks said, “but that’s it.
