By SHANNON HAUGLAND
Sentinel Staff Writer
The city’s consultants in Sitka’s hospital affiliation process Tuesday night laid out three outstanding issues in the Asset Purchase Agreement between the city and SEARHC under which SEARHC would purchase Sitka Community Hospital’s health care business and lease of its property.
The special Assembly meeting was held for “discussion/direction” on the latest stage of the negotiations in the SEARHC/Sitka Community health care merger, but after four hours, two of them spent in executive session, the meeting was adjourned with no action taken by the Assembly in open session.
There were no handouts for the public to review at the meeting, and the breakdown of the three purchase options was presented on a whiteboard. Assembly members were advised not to ask questions specific to the APA, which hasn’t been released to the public.
Members of the public have been advised that after the APA is made public they will have time to review the agreement before the Assembly makes a final decision on whether to approve the document.
“We’ve made considerable headway in pushing the envelope,” said Sarah Cave, one of two consultants guiding the process on the city’s behalf.
The consultants said the APA meets the goals the Assembly set out in the Request for Proposals it issued for an entity to purchase, take over or manage health care services being provided by Sitka Community Hospital. The Assembly signed a Letter of Intent to accept the offer by SEARHC, an Alaska Native-run regional nonprofit health care consortium for Southeast Alaska. Negotiating teams representing Sitka and SEARHC have been meeting regularly to hammer out the details.
The Assembly has said the city is interested in a plan that limits the city’s pension liabilities, reduces the financial burden on the city, maintains and improves health care services for all of Sitka, guarantees jobs for SCH employees, and guarantees equal access to health care for all of Sitka.
Three sticking points remain, but progress was being made toward resolution on all three, the consultants said.
The “governance model” for the new health care organization would be an advisory board that would play a “meaningful role” on such issues as strategic planning, and have a majority of its representatives from Sitka, Cave said.
The board also would have a strong relationship with the SEARHC accreditation board and there would be regular opportunities for input, she said.
The second issue was for setting up a system that ensures SEARHC will uphold its promises, including maintaining employment, building a new hospital, expanding clinical services and limiting the city’s liability under the Public Employees Retirement System. (The city has been told its pension liability would be over $30 million if Sitka Community were to close.)
Cave said SEARHC will be required to give regular progress updates, and share their performance against the outlined “metrics” which are tied to the goals of the affiliation.
“Also, there is a clear process for seeking remedies for nonperformance,” she said.
On a third area, that the new health care entity provide services currently offered at Sitka Community, Cave said, “We came up with a robust list of services SCH provides,” that would continue to be maintained under the joint operation.
Steve Huebner, the other consultant, presented the three options for SEARHC to pay for the Sitka Community Hospital business, and lease the SCH property.
– Option 1: SEARHC pays the city $8.3 million in cash up front, with an annual lease payment of $140,000 for the next five years for the hospital building ($9 million total).
– Option 2: SEARHC pays the city $700,000 a year for 22 years ($16 million total), plus $1 per year to lease the building, and the PERS termination cost of $646,000.
– Option 3: SEARHC pays the city $9 million up front with a $1 lease payment annually for use of the building.
Huebner said by his calculations, and taking into consideration the actual value in today’s dollars, Option 2 is the best deal for the city.
“From our perspective, we certainly didn’t see them as equivalent,” he said, in response to one Assembly member’s comments.
Cave talked about a few final items, including the city’s retaining the first right of refusal to create a new health care entity if SEARHC were to dissolve, and progress on SEARHC’s providing data requested by the city in the due diligence process.
Part of the special Assembly meeting was taken up with a discussion and votes on whether Aaron Bean should be recused for conflict of interest reasons, because he had taken bookings from SEARHC for some charter trips. Mayor Gary Paxton ruled he did not have a conflict, but Valorie Nelson made a motion to overturn Paxton’s ruling. That motion failed 2-4, with Nelson and Kevin Mosher voting in favor, and Paxton, Bean, Kevin Knox and Richard Wein voting against.
Bean said the bookings for the trips were not going to influence his decision. He said he’s made it clear how he felt about the affiliation from the beginning – in favor of pursuing the merger – and he has not wavered from that.
“I would say it’s not going to influence my decision one way or another,” he said.
“We’re reaching a bit ...” Knox said, referring to the possible conflict of interest. “I don’t see it myself.”
Both Mosher and Nelson felt the bookings represented a conflict.
Wein commented that the Assembly should always be asking the question of “who benefits?” on a number of things that have happened during the affiliation process. In the end, he decided against overturning Paxton’s ruling.
At 7:55 p.m. the Assembly voted 4-2, with Nelson and Wein opposed, to go into executive session. Prior to the vote the Assembly heard a few comments from the public. Karen Lucas said she didn’t feel a lot was being done to bring the public along in the process, including explaining the actual contents of the Asset Purchase Agreement. Carin Adickes, a member of the Sitka Community Hospital Board, said it appears agreements are being made before the document is presented to the public.
In addition to the six Assembly members, those attending the executive session were Cave, Huebner, outside attorney Sandy Johnson, City Clerk Sara Peterson, City Administrator Keith Brady, City Attorney Brian Hanson and Chief Finance and Administrative Director Jay Sweeney. SCH representatives Dr. Roger Golub and CEO Rob Allen were invited in at 8 p.m. and left at 9 p.m. The executive session ended at 10:15 p.m.
No further business was conducted and the meeting was adjourned.
Prior to the hospital discussion, the Assembly heard reports by the Chamber of Commerce and Fire Chief Dave Miller.
Chamber director Rachel Roy introduced TV producers from Brazil who are working on creating a TV drama series set in Sitka. One of the producers said it will be a show about “the real people of Sitka.” The producers are looking for more local sponsors, they said.
Miller gave a report on the city’s response to the bomb threat at Sitka High last week.
