The Southeast Alaska Regional Health Consortium, or SEARHC, is the largest private employer in Southeast Alaska. Earlier this year, its new CEO reported to employees that the company took a $4 million loss in 2011, and that big changes were on the way to address that loss. On April 12, CEO Charles Clement visited Sitka and spoke to KCAW News about what those changes mean. He also addressed something that happened before he started work at SEARHC — his January arrest in Anchorage.

This is part one of a two-part conversation with Clement. Part 2 will air on KCAW and appear here on Friday, April 20.

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Charles Clement

The Southeast Alaska Regional Health Consortium, or SEARHC, has a hospital in Sitka, doctors in Juneau, a variety of clinics, and roughly 1,000 employees. Some 450 of those people work at Mt. Edgecumbe Hospital and the rest of the SEARHC campus in Sitka.

The organization is working to recover from a $4 million loss in the last year. That has meant changes to benefits, and a hiring slow-down, among other things.

New Chief Executive Charles Clement says it was not a surprise that SEARHC has some obstacles to overcome.

“The day that I got here, to Juneau, it was immediately apparent,” he said. “There are issues with creditors and accounts payable and vendors. It was pretty obvious there were some challenges walking in the door. My approach has been, and continues to be, trying to be as forthright with stakeholders as possible.”

He e-mailed all thousand-or-so employees and told them the nonprofit health care consortium lost $4 million in 2011. And he said changes were on the way. He wrote that those changes would be difficult, “perhaps even heartwrenching.”

It was a different picture than the one painted just a year earlier. Then-CEO Roald Helgesen noted in the organization’s 2010 annual report that finances were in balance. So what happened between then and now?

Clement says SEARHC, like many tribal organizations, received windfalls from federal stimulus money during the economic downturn.

“SEARHC has grown,” Clement said. “Undoubtedly, it has grown over the years. If you look at our ability to sustain based on our year-over-year operations, it is just not there. What we’ve been relying on is these unanticipated windfalls to support operations. In the year where these unanticipated windfalls don’t come in, we’re sort of left in a lurch.”

And then there’s Congress. Federal money from the Indian Health Service accounts for a little less than half of SEARHC’s budget. In theory, Congress approves that funding by Oct. 1.

“That didn’t happen last year, and it probably won’t happen this year in consideration of it being an election year,” he said. “Congress probably– it’s theorized they won’t pass a budget, at least for our programs. So we’re going to be working off a continuing resolution, which means you get 30 days of money at a time. And when you run a large operation with no cash reserves and no operating reserves, that’s a precarious situation.”

To cope with that precarious situation, the organization is adjusting some of its agreements with the federal government – factoring in things like administrative costs, electricity, insurance. Clement says the organization could have received more funding for those things, but didn’t. It will, in future years.

And he says SEARHC will need to invest in better infrastructure – billing systems, electronic health records and more.

“Part of our challenge has to do with giving our employees the right tools to be successful, the right support to be successful,” he said. “That’s going to be a major focus of mine.”

At the same time, there are cutbacks. SEARHC has not laid off employees, but last week, it announced a hiring slowdown. Clement says many vacancies that don’t directly deal with patients are on hold.

Also, SEARHC will change the way it insures employees. Switching to the federal employee benefits program could save the organization about $1 million between June and October. Clement says he hopes to realize $4 million in savings during a complete fiscal year.

For employees, it means deductibles will be paid for care within the SEARHC system. They’ll select from one of 15 different insurance plans, all of which have different costs. Clement calls it a “substantial departure” from the past.

KCAW: Are you worried about losing employees who were initially attracted to that benefits program?
Clement: “Yeah, I am. I’m probably more worried about general employee morale. There’s a difficult set of circumstances and, coming in new, being asked to make lots of difficult decisions – employees not knowing me, who I am, what my approach, what my style is – and coming right out of the chute and asking them for these considerations is a difficult proposition for me.

“It’s a difficult proposition for my management team. We’re in a difficult spot financially, and we’re asking for these considerations from our employees, and we realize it’s a tenuous thing. We have to demonstrate to employees that we value them, we want them to be here, and we support them. When you don’t have money to do that it becomes a difficult exercise. My approach has been to try to weigh in with transparency and participation to say, you know, I’m open to any number of suggestions to solve these problems. My e-mail is known to anybody that wants to look it up. I receive all e-mails and I try to respond. But at the end of the day if you don’t have the money you don’t have the money.”

Employee feedback has already reversed SEARHC’s course on one proposed change. The organization was considering reducing the amount of paid time off it gives to employees.

“Quite frankly, we got a lot of feedback on it, and we made the adjustments,” Clement said. “In the big scheme of things, it wasn’t as important to do as it was to try to demonstrate to employees that we are listening, and that we do appreciate and value their feedback and where we can give, we will give. And where we can give, we will give. And where we can’t give, we can’t give. But those things we can do, we will sure try to do.”

Clement says he’s trying to maintain transparency with employees – to keep them in the loop and give them a voice.

But that transparency has at times crossed into uncomfortable territory. In January, Clement was arrested in Anchorage for driving under the influence and domestic violence assault. Those charges were dropped in February, and Clement pleaded no contest to disorderly conduct. In a letter to staff after his court appearance, Clement apologized for how the incident might have reflected on SEARHC, and said “I have never denied consuming alcohol and then driving. I took my injured wife to the nearby hospital and then returned home to be with my kids.”

Clement says the incident was a learning experience.

Clement: Sometimes you make mistakes and they’re more high profile than other times. It doesn’t matter. You have to approach them the same way. You have to stand up and atone, and you’ve got to keep moving forward and moving on. You’ve got to grow and learn, but you can’t stop and you can’t put your head in a hole.”
KCAW: The original charges included domestic violence assault and driving under the influence. A large part of SEARHC’s mission deals with the prevention and treatment of those two things. Given the timeframe it happened, right before you came on the job, did it affect your ability to lead when you got here?
Clement: “You know, I would imagine it has. Maybe it’s that I’ve used a different set of tools to try and lead. This is something that happened in my life that not a day goes by that I don’t think about. It’s really shaped me profoundly in terms of … being a public figure, or somewhat public figure, is a new experience for me. The bulk of my life, I’ve been the guy down the street, just Average Joe. All of a sudden caring what publicly people think about you or what they might know about you is really a new experience. It’s hard for me to pull the two apart. The fact of the matter is, every day I have to make difficult choices about things that happen here at SEARHC. I have to wonder, do people think this, do they think that? This is one more thing that goes into that equation.”

This was part one of a two-part interview. Tomorrow, Clement discusses SEARHC’s long-term future, and why he’s optimistic, despite the current financial troubles.