Daily Sitka Sentinel

$4.1 Million Claim To Be Paid by City

By SHANNON HAUGLAND
Sentinel Staff Writer
    The Assembly in a 5-1 vote on Tuesday approved a $4.125 million settlement with the federal government to resolve the city’s outstanding liabilities related to physician compensation violations under two federal laws.
    The money will come from a city-funded escrow account to cover city obligations related to the sale of Sitka Community Hospital to SEARHC. The city’s debt to the federal government was for overcompensation of Medicare and Medicaid reimbursements that were discovered in the SEARHC due-diligence process during the merger of the two hospitals.
    “We prepared for this settlement and this settlement is the best we could’ve hoped for,” City Administrator John Leach said today.
    The vote came after a 45-minute executive session, at the end of Tuesday’s regular Assembly meeting.
    City officials said the transfer from the city general fund will be made up with proceeds of the city tobacco tax, which have always been dedicated to the city hospital, and contributions from SEARHC.
    In other business Tuesday night, the Assembly agreed to issue a request for proposals for a boat haulout at the Gary Paxton Industrial Park, approved budget changes on first reading, made appointments to commissions, and discussed the possibility of a revised “climate emergency” resolution that may be brought back for adoption at a future meeting.   

Hospital Settlement
    Leach reported that the $4.125 million for the settlement will come out of the $4.5 million the city set aside in escrow to the federal Office of the Inspector General, as required under the OIG settlement agreement and in accordance with the Asset Purchase Agreement between the city and SEARHC. The APA outlines the terms of the affiliation between SEARHC and Sitka Community Hospital.  
    “SEARHC has cooperated, collaborated and consented to the release of the $4.125 million from the city-funded escrow account to the OIG as required by the settlement agreement and in accordance with the APA,” Leach said in a prepared statement.
    The item was discussed for 45 minutes in a closed-door session at the end of the meeting.
    The motion for the settlement was “to approve advance of escrow funds from the General Fund to Sitka Community Hospital Dedicated Fund to be repaid from future revenues, direct the administrator to expend escrow funds from Sitka Community Hospital Dedicated Fund to settle Office of the Inspector General Stark/Anti-Kickback liability, and direct the administrator to sign the settlement agreement.”
    The motion passed 5-1, with Thor Christianson, Kevin Mosher, Kevin Knox, Steven Eisenbeisz and Mayor Gary Paxton voting in favor. Richard Wein voted against, and Valorie Nelson was absent.
    In a prepared statement Leach said: “The liability stems from SCH overcompensating physicians in violation of Stark/AKB laws.”
    Speaking to the Sentinel today Leach said, “We self-reported this to the OIG when we realized it happened. It’s a common thing that can happen in hospital mergers.”
    He said city staff will continue to work with SEARHC by providing written assurances and plans which implement the settlement agreement as required and contemplated by the APA.
    “Remember, the escrow account was intended to provide for all liabilities which CBS (City and Borough of Sitka) has retained and is obligated to pay under the APA,” he said in his statement. “If there is a shortfall in escrow funds, which we believe is very unlikely, CBS is obligated to appropriate and pay that shortfall. We are confident we’ll be able to continue to successfully collaborate with SEARHC in implementing the APA.”
    The issue of the SCH violations of the two federal laws related to Medicare and Medicaid compensation came to light during the due diligence process for the merger between the two health care institutions.
    In another legal matter, the Assembly met for 15 minutes in executive session to discuss legal fees required for lawsuits related to the police department. When the Assembly members returned to open session they voted approval on first reading of an ordinance providing an additional $88,000 in legal fees for the lawsuits.
    At the beginning of the meeting, SEARHC CEO and President Charles Clement gave his six-month report on how the affiliation agreement is working out.
    He said the increased volume at the SEARHC health care facilities in Sitka has allowed the consortium to offer more specialty services, including those for neurology, dermatology and urology, with some 2,000 specialty visits added since the merger.
    He said SEARHC is trying to monitor patient satisfaction as well as make SEARHC a desirable place to work. He said some 121 SCH employees signed up to work at SEARHC, and all but 10 were still there. He said SEARHC followed through with its commitment to offer every SCH employee in good standing employment at SEARHC.
    “I think the transition went relatively smooth,” he said. “Overall we’re pleased with how the transition has gone.”
    Clement said the consortium is going forward with planning construction of new facilities on Japonski Island, including a new hospital, outpatient clinic and a long-term care facility. Currently, all hospital services are offered in the SEARHC hospital building on Japonski Island. On the Sitka side of the bridge, longterm care and some rehab services are being provided in the old Sitka Community Hospital building and primary care is being provided at Sitka Medical Center and Mountainside Family clinic. Additional urgent care services are offered in the old Moore Clinic building.
    Clement said design teams on the new Japonski health care campus are visiting. “We plan to move forward,” despite the fact that “there are variables we are working through,” he said, mentioning the nationwide coronavirus crisis.
    “There’s a great deal of uncertainty right now,” he said, noting COVID-19 and its impacts on a number of factors affecting the economy of Alaska and Southeast.
   
Marine Haulout         
    In other business, the Assembly voted to issue a request for proposals to build and operate a marine haulout on up to 6.8 acres of leased property at the Gary Paxton Industrial Park.
    The vote was 5-1 on the RFP, which has a goal of creating a privately funded and managed marine services shipyard at the park. The plan calls for a private sector developer to construct and operate a marine vessel haul out facility and an EPA-approved boat washdown area, and to have them in place by June 1, 2021. The operator of the current haulout at Halibut Point Marine plans to close the facility in 2021.
    Leach said the city has to take action, given the impending closure of the HPM facility.
    “The primary concern is keeping business here, keeping boats here and having haulout capacity by the summer of ’21,” he added today.
    He said if upland property is leased to the developer, support businesses would be subject to the developer’s lease requirements. He also noted in the Assembly packet that if the proposals differ in how much of the available upland property is of interest to the developer, public input should be gathered because it is public land.
    Fisherman Jeff Farvour said he believes the city needs to develop a master plan for the facility, and make sure there are opportunities for anyone to use it. He said it has to be an “inclusive boatyard.” He belongs to a boat haulout working group, and is advocating on the fleet’s and community’s behalf for state and federal help on waterfront facilities.
    Speaking of the likelihood that public money will be involved, he said, “I think many of us believe and understand that it’s unlikely a developer would see this as a good opportunity for them.”
    He added today the trend on the West Coast is for municipalities and other government entities to have a stake in such operations. He cited Wrangell and Washington’s Skagit County as examples. “With that in mind, in order to best serve our community, I believe its prudent to plan ahead for something other than a single developer taking charge of operating and managing a boatyard at GPIP and that the City should take a larger role in that aspect.”
    Fisherman Mike Nurco supported having the city retain ownership of the land.
    There was no consensus that the RFP was the best way to proceed, but most felt it wouldn’t hurt to ask for proposals.
    “At the end of the day, we don’t have to accept (offers),” Christianson said. “Let’s send it out and see what we get.”
    The vote was 5-1, with Wein voting against. He said the city needs to be the leader on the project, and go after “preliminary funds” to begin the process.
    “We’re not approaching this in an orderly and business-like fashion,” he added today.
    GPIP director Garry White noted today that there is a strategic plan for the development of the park that includes construction of a haulout. There is also a phased in design for a $6.8 million haulout but no funds available.
       
Other Business
    In other business, the Assembly:
    – spent considerable time discussing a new resolution to declare a “climate emergency.” Approval of a previous resolution on the subject failed by a single vote. Mosher, who voted against that measure, agreed to co-sponsor a new resolution drafted by Valorie Nelson, who also opposed the previous version. A number of young people and adults testified about the need for the city to take action toward reducing greenhouse gases.
    – passed on first reading a budget ordinance to fund $30,000 in repairs to the Crescent Harbor lightering float. The vote was 4-2, with Eisenbeisz and Wein voting against.
    – approved on introduction a zoning text change to add bulk sales as a conditional use in Industrial zones. The request came from Jeremy and Savanah Plank, owners of Sitka Bulk Foods on Smith Street. Bulk retail is currently prohibited in the Industrial zone, and there is no definition for bulk retail. The new ordinance would allow bulk sales as a conditional use in the I zone, and create a definition. City Planning Director Amy Ainslie said that bulk retail appears consistent with the intent of the zone, but making it a conditional use will allow the planning commission to examine the uses on a “case by case basis.” While some commented that they didn’t like the precedent of implementing the changes after the business is in place, others said it appeared to be an honest oversight, and the owners were trying to correct it.
    “This kind of thing happens - we noticed it and we’re fixing it,” Christianson said. The ordinance was advanced to second reading on a 6-0 vote.


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