By SHANNON HAUGLAND
Sentinel Staff Writer
The city and Southeast Alaska Regional Health Consortium announced changes in the proposed affiliation agreement that will result in the move of Sitka Community Hospital’s acute care and emergency services to Mt. Edgecumbe “immediately” when the sale closes.
A news release from the city said that the two parties are updating the proposed Asset Purchase Agreement “to simplify the way ownership of SCH is transferred.”
“This change is necessary because part of the compliance review for SCH – which does not affect the sale to SEARHC — is taking longer than initially expected,” the news release said. “Because the review is not required to be part of the sale, the CBS and SEARHC teams agreed that it would be best to complete the sale and the compliance review separately.”
City Administrator Keith Brady explained today that the compliance review is part of the due diligence process, and is related to SCH’s contracts with providers, and possible Medicaid and Medicare liabilities.
The city said one effect of the update is that acute care hospital and emergency services will move to Mt. Edgecumbe Hospital immediately when the sale closes, but long-term care and Mountainside and Oceanside Clinic services will remain in their current locations. The other effect is that the amount of money the city will be required to place in escrow as part of the transaction will be significantly reduced, because the city will now pay any outstanding Sitka Community Hospital liabilities directly when they come due, the release said.
“We continue to be thorough in our review and completion of the agreements,” Brady said in today’s announcement. “By making this change now, and given SEARHC’s willingness to work with us, we are able to stay on track. This change will not affect the remaining key terms outlined in the APA and Lease Agreements.”
The Assembly is scheduled to review and vote on the final documents on April 15, after which the proposals will go before the SEARHC Board for consideration and approval.
“Simplifying the transfer of services arrangement ultimately benefits the community, CBS and SEARHC,” said Brady. “The community can continue counting on accessible health care services; CBS will have access to funds that could otherwise have been tied up in escrow; and SEARHC can streamline the transition of services.”
Attorneys from both organizations are modifying the agreements in preparation for the special Assembly meeting 6 p.m. April 15 in Harrigan Centennial Hall. The city negotiating team plans to distribute revised documents to the Assembly and release them to the public as soon as they are available and not later than April 8.
The Asset Purchase Agreement outlines terms under which SEARHC will assume health care responsibilities for the entire community. SEARHC has proposed paying between $9 million and $16 million – depending on the option selected by the Assembly – and offer jobs in Sitka to the current SCH employees for at least a year. SEARHC is planning on building a brand new 25-bed acute care hospital, medical offices and long-term care facility on Japonski Island.
The other document up for consideration is the Lease Agreement, outlining the terms under which SEARHC will lease the Sitka Community Hospital building for up to five years. The city will retain ownership of the hospital building.
Assembly members contacted today said the announcement didn’t really change their thinking on the merger.
“I’m not in favor of this takeover and I don’t care how much Kool-Aid they try to feed me,” said Valorie Nelson, who was not on the Assembly that voted to pursue a request for proposals with SEARHC. “That’s how I feel.”
She said she’s concerned about the amount of money that the city will need to place in escrow and the unknown liabilities associated with the agreement, and said the process felt rushed. She said the public should have been allowed a say – through a vote – and that an Assembly member should have been on the negotiating team.
Kevin Knox said he wasn’t surprised there were changes still under way at this point in the process.
“It’s just part of the due diligence and how this market is a constantly shifting animal for health care providers,” he said. “It’s a complicated thing to have to go through. Unfortunately, the nature of health care in the U.S. has forced the hand of small rural hospitals and we just have to go through this. Do I wish it was different? Do I wish we could keep Sitka Community open with a good, long-term outlook? Of course I would like to see it remain open and continue to provide the community with all the things we want.”
