EDITOR’S NOTE: The options mentioned in this letter from the CEO of Sitka Community Hospital are the financial terms offered by SEARHC for the purchase of the business of Sitka Community Hospital. They are outlined on pages 21 and 22 of the SEARHC submission to the city’s request for proposals.
Community Hospital
Dear Editor: I shared the attached comments with the Assembly members and would like to share them with the citizens of Sitka.
Re: ‘‘SEARHC Options for Purchase of SCH Business.’’
Dear Mayor Hunter and Assembly members: I am not making a recommendation on the three proposals the Assembly is considering at the Aug. 28 Assembly meeting. Whatever the decision, I will work to implement it to the best of my abilities.
I wanted to pass on my analysis and thoughts on the three options that SEARHC has presented to the Assembly for the purchase of the business of SCH. I believe Option 1 would be the best long-term deal for CBS, but it will take some work by the Assembly and the citizens to make it work.
If any option is accepted, I believe the Assembly should require a one-time payment of approximately $646,000 to cover the termination fee for the PERS liability plus the purchase price.
Option 1
I believe the $8.3 million number is low and part of the next stage negotiations should be to get that number higher. I would ask to see how SEARHC justifies that number as a start. Regardless of the amount, I think CBS should place the purchase price minus the termination fee into the Permanent Fund. This protects it and allows it to grow for perpetuity.
The tobacco tax should be repurposed and directed to be used to pay for the SCH PERS liability until it is paid off. It should also be increased by $.50 to $1.00 a pack to get the annual amount closer to $1 million a year or more. CBS needs to be aware that it is likely the tobacco tax proceeds will fluctuate and could eventually trend downward as fewer people smoke. That hasn’t happened yet, but it certainly could. This change of use of the tobacco tax might take a new vote of the citizens. If so, I would also recommend part of the language included would be that after the PERS liability is paid off, tobacco tax proceeds will go to support the schools or into a fund to support health care initiatives in Sitka.
I believe there is a good chance that SEARHC will need to lease the current building for longer then 5 years. It seems quite ambitious for them to construct such a large medical campus in such a short period of time.
$8.3 million will generate $415,000 at a 5 percent return. Tobacco tax is around $800,000 a year right now. The PERS liability payments are in the $1.5 million a year range. Unless the tobacco tax is raised, some money will have to come out of the general fund to make the yearly payments.
Option 2
There is a higher level of risk with Option 2. A lot will change in the health industry over 22 years. SEARHC could once again find itself in financial trouble and unable to meet its obligations. If it cannot make the payments, CBS will have to cover the PERS liability from its general fund. There is also no guarantee that the PERS liability will be completely paid off in 22 years. The liability will continue to fluctuate through time, and while it is possible it could be paid off earlier, more than likely it will stretch out longer. If it goes beyond the 22 years of payments, CBS will have to cover the remaining amounts out of general funds.
The other factor is that at the end of the 22 years, there is no remaining asset. The liability of PERS will hopefully be gone and the tobacco tax can be used for something else, but there is nothing else left. Under Option 1 with the money going into the Permanent Fund, that money will remain and grow in perpetuity.
Option 3
This option makes no sense to me.
I have not done a net present value analysis of the options as I’ve laid them out. I expect that Jay Sweeney and the CBS Finance Department will provide a fuller financial analysis and recommendation for the Assembly.
Thank you for the opportunity to comment. I’m happy to answer any questions.
Rob Allen, Sitka
SCH Support
Dear Editor: After attending Monday’s town hall meeting regarding Sitka Community Hospital, I feel obliged to write this letter. As I listened to the comments of the evening, I heard one word repeated over and again: TRUST. Can the people of Sitka—especially the employees of SCH—trust the corporation of SEARHC? While mistrust has periodically been an issue between the two hospitals, it was rekindled most recently in early 2016, after SEARHC CEO Charles Clement recommended developing a management proposal for SCH. Soon after, the two hospitals entered into collaborative discussions about consolidating and eliminating the duplication of medical services in Sitka. However, it eventually became clear that SEARHC was really more interested in a buyout of SCH to eliminate competition. (Not only did this realization fuel greater mistrust, it begs the question: how can SEARHC use federal dollars, intended for beneficiaries’ healthcare, to push SCH out of business and create a monopoly?)
When SCH pushed back and declined to entertain the idea of a buyout, SEARHC put the squeeze on and further breached the trust. One obvious example is their purchase of the Moore Clinic, directly outside the doors of SCH (literally connected by a walkway). SEARHC then erected a sign, wielding a brand new logo for the SEARHC-owned Sitka Medical Center, which until then was a purple/blue/black mountainous scene (and remained so on the sign at their Katlian St. location for some time after), but now contains the same blue/green colors of SCH, along with a reworked combination of the SCH cross and mountain/water waves. This new logo does not contain any mention of SEARHC, nor their customary hunter green color or devil’s club symbol; instead, it seems purposely deceptive, designed to appear as if it’s part of the SCH campus to mislead and redirect potential SCH patients.
SEARHC also then began spending more IHS dollars to increase duplication of medical services in Sitka and encroach in two areas in which SCH has long excelled and served the people of Sitka: home health and a walk-in clinic. SEARHC even ran an ad campaign before opening their walk-in clinic, stating it was “Sitka’s first walk-in express care clinic” and that “having one available is new to Sitka and part of the medical care picture that has been missing here.”
Both are blatantly untrue statements, as SCH’s Mountainside Clinic already had a long-established walk-in clinic. Again, this is a clear breach of trust and leads one to wonder why SEARHC would purchase a building a few feet from SCH just to duplicate medical services that are already being offered by SCH. It surely seems like an act of intimidation, intended to financially cripple SCH and unsettle her employees—who are then expected to trust their (potentially) future employer. Trust is foundational in a relationship. It requires integrity, respect, compromise, and direct, honest communication—not encroachment, undue pressure, provocation, fear, or a relentless barrage of advertisements to siphon business.
This is not an issue of Sitkans vs. Sitkans or Us vs. Them; we are all neighbors, living in a community that we all care about, including both SEARHC and SCH employees alike. This is instead an issue of concerned Sitkans rightfully questioning the true intentions and strategies of a regional corporation. To not speak up would be an injustice, and since the SCH Board has chosen to remain neutral in this process, it is fair to ask, who will advocate for the employees of SCH? These outstanding, dependable employees need and deserve an advocate. They carried SCH through the last 3-1/2 turbulent years. Every employee—not just the current highly-skilled management—is responsible for the ever-growing, ongoing success of SCH. Not only did their dedication help avert a financial catastrophe for the City, but they continue to keep SCH afloat, allowing it to remain on its clear trajectory toward sustained financial health. Despite the constant, demoralizing threat of a takeover, these good and faithful employees persist in showing up and working hard daily because they care about their mission. So who is going to speak up for them when or if SEARHC takes over? SEARHC states there won’t be any layoffs for now, but who can guarantee there won’t be layoffs in six months or a year? Will the jobs remain equivalent to currently held positions or will people be placed in entry-level positions? Will the jobs be located in Sitka or will employees be required to move? What is their recourse if forced to do so?
SCH is a diamond in the rough. She has proven she’s “the little hospital that could,” as SCH Director of Operations Steve Hartford likes to call her. Give her a chance to show the world how bright she is with some continued polishing. In July alone, SCH made a substantial profit—without any funding from taxpayers, including the tobacco tax. Honestly, if one combines these few, small examples of SEARHC’s untrustworthiness and the markedly improved financial status of SCH, it’s clear that now is not the time to be considering a sale of such a vital community resource.
Angie DelMoral, Sitka
Sitka Rotary Benefit
Dear Editor: How well do fellow Sitkans know their local Sitka Rotary Club?
The club is having a fundraiser and wildlife tour on Sept. 22. We will view the Sitka wildlife aboard an Allen Marine Tour boat from 1-4. We will be leaving from and returning to the Centennial Hall boat dock. Please join us for a fun wildlife tour and get to know some local Rotarians and learn about the local club. We would love to share what we do in Sitka and internationally, including information about and hopefully from our international exchange students and program.
If you have wondered about our club or just want to learn more about it in a fun setting, this would be a great way to do that. We will have a no-host wine and beer bar as well as treats for the afternoon event. Tickets are $45 for adults, $35 for seniors and students, $15 for under 12. Tickets are available at Old Harbor Books or from local Rotarians. Thank you.
Jeff Budd, Sitka
Mayoral Candidate
Dear Editor: Once, camaraderie, frugality. Lone city clerk, very busy, efficient. City attorney prosecutor defender wrote city legal code, $100/month.
Sitka small: knew everyone’s home, 3 mills tax.
Lotsa informal talk about Sitka. What was good about it, where and how many life-ways came about, why Sitka is as it is, i.e. its history. History usual topic of end-of-the-day, now we can relax because work was done.
Implicit: folks proud of Sitka’s usual ways and status, eg discussion of Sitka traditions, of cooking so no one would forget how to make Halibut Caddy Ganty.
Because old names are easy to forget, frequent talk about people now gone, so we wouldn’t forget.
City admin most assurably honest. It’s this city that Gary Paxton knows.
Gary, running for mayor, knows well whereof I speak. Long ago we were young at the same time. I didn’t know Gary, I was a lowly nurse with children with bone TB on Mt. Edgecumbe.
Now Gary sorta knows me, always has a hug.
I submit, Gary is an honest man (probably among thieves). He won’t forget to hug a very old friend. (And I am sure that if I needed help, he would see to it.)
Judy Johnstone, Sitka
Sitka Community Hospital
Dear Editor: I want to thank Klaudia Leccese for the letter to the editor last night. I agree with her comments. She is right on.
I did not attend the so-called town hall on Monday night because I knew it was a set-up with three SEARHC employees sitting at each table. How is that a town hall. I have to wonder why the Assembly and City of Sitka management would set up something like that. Would it be SEARHC’s influence. Well yes, SEARHC has been as much or more a part of this whole process from the beginning. Why is the City of Sitka allowing this?
The citizens have the right to discuss the decision of selling one of our assets without the purchaser sitting at the table.
If you are selling a house, you don’t sit down with the buyer and the buyers agent to discuss what you should do. You negotiate on your behalf. You would not allow them to influence your negotiations. You would not allow them to sit down at a meeting to tell your family why you should listen to all the reasons the buyer wants your home and a low price with no guarantees, no inspection, nothing in writing with regard to what they are proposing. I know no realtor that would let that happen to the seller. We are that seller.
Many Sitkans have been trying to explain that to the Assembly. Don’t take what they offer, even if you want to sell, without negotiations that benefit you.
We have also have been trying to tell the Assembly, you do not have enough knowledge on how this will affect the city. Why is it that they never considered a possible downside until citizens brought it up. At the last meeting they were concerned. What can we do. They must not have been listening to the many people testifying and talking about it for months.
What could they have done. Do whatever research on the economic effects on Sitka.
Review the details in the offer and see, as most citizens have, it is not enough money to make Sitka whole. Meaning, we will have debt hanging over us after 22 years with no way to pay it. We have a $37 million unfunded liability. John Holst spoke on this subject Monday evening.
SEARHC offers to pay $700,000 yearly for 22 years which will leave us with about $20 million to pay after the 22 years. If they pay $1.7 million in 22 years it will be paid off.
We have an empty building we need to deal with.
We have a much better chance of paying the debt off if we have a functioning hospital.
We have a good building and good staff, we need to hire CEO with experience and the management ability to turn the finances around. We have great employees and a great hospital and clinic structure. It was built in 1983 and it has a longer life than 3 to 5 years. Thanks for that bit of info that is going around.
We will probably need updates as health care changes and grows, but the building is in great condition. At least it is not 70-plus years old.
Another consideration is that SEARHC stated that they had over 50,000 patients come to the hospital in the last year which includes many from the outlining area, coming from their clinics, where further medical needs require a hospital or specialists. So they will be adding to that the Sitkans that have been using Sitka’s clinic and hospital.
There is a new Coast Guard Cutter in town, with crew and families There will be those additional patients for SEARHC as they are part of the federal government.
Can they handle that many people and still give good health care to everyone?
All of Sitka will be affected, one way or the other, but four Assemblymen will make the decision. I hope they understand they will be known as the Assembly of 2018 that did not allow the 9,000 citizens an advisory vote.
All of SEARHC’s written material says they will hire all the employees. A week ago Mr. Clement stated, and it was recorded, they can give no guarantee that they will hire the employees, give them the same type of job or any other considerations.
I think their continual misrepresentations are coming to full light and we should be wary.
I have talked to SCH employees who are within one to two years of reaching retirement from the hospital. They would have to move to another area or find a state job that is part of the retirement benefits that they now have.
In fact, SEARHC is funded by the government for native health care. They have a hiring preference for Natives, as they should. Are they going to be able to handle all the needs in Sitka.
Nancy Blatchley Davis, Sitka
Decision on SCH
Dear Editor: Two experts from Quorum recently gave the Assembly their professional opinion regarding the SEARHC offer to buy SCH. These two men that help manage over 700 hospitals nationwide didn’t sugarcoat the truth. A small town the size of Sitka isn’t big enough to support two hospitals.
They said half the people in town are on Medicare/Medicaid and they use the services of both hospitals and the other half travels out of town for their medical care. The numbers don’t lie.
My hope is the Assembly members will base their decision on facts and not emotions.
SEARHC has offered to hire every employee at SCH so Sitka wouldn’t actually lose any jobs. SEARHC wants to build a new $100 million hospital complex here which would provide a huge boost to our economy. My fear is SEARHC will change their mind if our Assembly fails to support their growth plans and build their hospital somewhere else. We could end up with no hospital at all in Sitka.
It will be a sorry day for Sitka if our largest employer decides to build that new hospital somewhere else and Sitka loses hundreds of stable high-paying medical jobs. Not only could we lose these hundreds of long-term hospital employees but the hundreds of high pay construction jobs it will take to build the new SEARHC medical complex.
Clyde Bright, Sitka
