FIRST DAY – Baranof Elementary School paraprofessional Brooke Rivera helps kindergartner Andrei Kyrie Joaquin find his class as children line up for school this morning. Today was the first day of school for a third of the kindergarten class, which was divided into three groups. The final group of kindergartners begins school Monday. (Sentinel Photo by James Poulson)

Assembly Approves Hospital Sale, Terms

Sentinel Staff Writer
    The Assembly voted 5-2 Monday night to approve the asset purchase agreement and a facilities lease agreement with Southeast Alaska Regional Health Consortium concerning Sitka Community Hospital.
    “It is an incredibly important part of our community,” Mayor Gary Paxton said of the hospital. “My personal view is as wonderful as it has been and it is, there is absolutely, in my view, empirical evidence that there is some serious liability associated with that.”
    The sale and lease documents now go to the SEARHC board for approval on April 26, and both parties will seek a final closing date of June 30.
    At that time, SEARHC will assume operation of Sitka Community Hospital.
    Assembly members Richard Wein and Valorie Nelson voted against the lease and purchase agreement.
    In a news release today City Administrator Keith Brady said the agreement had been reached by hard work and collaboration of the city, SEARHC, and Assembly.
    “We are pleased with the outcome, which ensures the patients and residents of Sitka have access to quality health care services that they can rely on in the future,” Brady said.
    After approving the lease and purchase, the Assembly turned to the second item on their agenda, choosing one of the three options SEARHC offered for paying for the facilities and the SCH health care business: (1) $8.3 million up front with $700,000 toward the Sitka hospital facility lease; (2) roughly $16 million in $700,000 installments over 22 years; or (3) $9 million up front.
    The consulting team hired by the city recommended option two.
    City consultant Steve Huebner said the total payment amount is $15.4 million.
    “In addition to that, upon closing, there is a $700K payment and then there is a PERS payment of $746K,” he said. “So there is $1,346,000 paid on day one, total payments $16,746,000.”
    Prior to the vote Mayor Paxton thanked the more than 30 members of the public and the parties involved.
    Wein said for consistency he had to vote a particular way.
    “If I was inconsistent I would vote for option two,” he said.
    The Assembly concurred with the consulting team on option two, and it passed by a vote of 5-1 with Wein the lone no. Assembly member Nelson had left the meeting after the initial vote.
    That vote, however, was dealt a wrinkle just a few hours before the meeting, when the city consultants and the city’s legal advisers were informed that, due to the Sitka Community Hospital’s being grandfathered in with the Centers for Medicare & Medicaid Services, SEARHC could not use the hospital provider number for billing CMS for Medicare and Medicaid.
    “They would immediately be out of compliance, and would not be able to operate the long term care beds,” Heubner said.
    That wrinkle deals mostly with city liabilities, and not the purchase agreement. While pieces of it did intertwine in the provider numbers used to bill through Medicare and Medicaid, they are part and parcel and cannot be separated.
    The provider numbers, whether SEARHC uses them or not, either increase or decrease the need for the city to have money in escrow for their own liabilities. The liabilities would be there regardless, Assembly members were told.
    If SEARHC can use Sitka hospital provider numbers then the city has to put money aside to make sure the city covers its own liabilities. If SEARHC does not use the Sitka hospital provider number then the city would be on the hook for them anyway, the consultant said.
    Under the agreement, basically a Plan A and a Plan B will be on the table.
    If SEARHC can use the provider numbers then the city has to place $4.5 million in escrow. If SEARHC cannot use the provider number the city does not put the money in escrow.
    The consultants said they were reasonably certain that all patient care would continue as is.
    “Still, SEARHC is willing to work on the grandfathering issue,” consultant Sarah Cave commented.
    Paxton said “More significant than the escrow, it is important that the long term health care is there, that it gives some comfort to our community.”
    The issue was if SEARHC took the provider numbers over and then CMS said SEARHC needed to operate under the current compliance guidelines, such as room size, that are currently grandfathered into the Sitka Community Hospital, then SEARHC would technically have to shut those programs down.
    If CMS does say that, then the City of Sitka holds onto the provider numbers, SEARHC operates the program, the city bills it and it is the city’s liability.
    The consultants said SEARHC is working to make sure there will be no gaps in service or changes to that program. The Assembly, by voting its approval, is saying, “do the best you can to get us the best deal available.”
    That will take negotiations between SEARHC and CMS.
    Prior to the vote, Mark Walker of Wrangell, founder of Alaska Island Community Services, said over the course of 27 years it has developed a diverse array of medical, dental, pharmacy and behavioral health services in Wrangell.
    “The health care and financial realities of today are pitting the viability of the small organizations like AICS at risk,” he said. “So we partnered with SEARHC to ensure the provision of quality health care in Wrangell. We found that the mission of AICS and the vision and values of our organization were complementary to the visions and values of SEARHC… it has been our experience that working together we have secured the long term health care services in Wrangell.”
    He noted that Wrangell Medical Center, serving the community since the 1920s, recently joined that partnership.
    “In the same way this partnership has helped the community of Wrangell,” he said, “I believe your vote tonight can help sustain the long-term viability of health care for this community.”
    Before the discussion started, Assembly member Kevin Knox, in the interest of disclosure, said his wife, who is an untenured employee of the Sitka School District, has been offered a job by SEARHC.
    Aaron Bean said he thought a discussion about recusing Knox on the hospital issues was warranted because of this development.
    Nelson said there are conflict of interest laws that pertain to issues like this and said there is a lack of trust in the Assembly within the community.
    But Paxton ruled there was not a conflict.
    “My God,” he said. “This is my hometown. It is our hometown. We have got to trust each other. I think everybody on the Assembly values that and is doing our best to be committed to that.”

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