Sitka Community Hospital CEO Rob Allen (l.) explains the pros and cons of a "proposed affiliation" with SEARHC, as board members Steve Gage and David Lam look on. "We will survive," Allen said, even if the board decided not to move forward with the plan. (KCAW photo/Robert Woolsey)

Sitka Community Hospital CEO Rob Allen (l.) explains the pros and cons of a “proposed affiliation” with SEARHC, as board members Steve Gage and David Lam look on. “We will survive,” Allen said, even if the board decided not to move forward with the plan. (KCAW photo/Robert Woolsey)

The Sitka Hospital Board has authorized a letter of intent to combine operations with the Southeast Alaska Regional Health Consortium’s Mt. Edgecumbe Hospital.

The board approved the document at its regular meeting last week (12-1-16), but a merger — if it happens — is still a long way away.

Downloadable audio.

The Sitka Assembly is scheduled to review Sitka Community Hospital’s proposed Letter of Intent to proceed with an “affiliation” with SEARHC at its next regular meeting on Tuesday, December 13. See an unamended draft of the letter here.

Before going through the letter of intent, hospital CEO Rob Allen reassured the audience of mostly hospital staff that Sitka Community was not coming to the table with a weak hand.

“We have an excellent patient base, we have a tremendous staff. Despite what you think of our facility it has a lot of value. It is a good facility. And we will be competitive if we don’t move forward with this. We will be competitive with SEARHC. We can, I think, survive.”

Allen said that the strongest argument for collaboration with SEARHC would be stability. Continuing to compete for Sitka’s limited supply of patients would mean significant change at the city-owned hospital.

“I think we will be smaller. We will have to shrink. Both programs and staff. The goal that I would set — and I have set for us — is that operations will cover all of our costs, including depreciation.”

For years, Sitka Community Hospital has just managed to get by with around $150,000 in cash subsidies from the city, and over $600,000 from the tobacco tax — neither of which is a sure thing in the future. Allen thought that SEARHC had a couple of other realistic options besides a merger. One would be to simply wait for Sitka Community to go under on its own.

“I think the other option that they’ll likely consider is that maybe in the springtime, if the budget crisis is bad enough in the city, that they just step forward to the assembly and say, Here’s $14 million, we’ll just buy the hospital. At the proper time, with the way things are going in the city, that might be very attractive.”

The letter of intent, or LOI, was drafted by the health care consulting firm of ECG, which evaluated Sitka Community’s situation over the course of several months last summer and fall. Board president Bryan Bertacchi thought the initial draft of the LOI was at best incomplete. He said he felt like a broken record pointing out yet again that the letter failed to address what he calls “fatal flaws.”

“The fact that Native preference in hiring existed, Native preference in patients existed, and they wouldn’t open their books. I see in the LOI that they’re going to open their books. That checks one box for me. But those two other issues are fundamental, and I don’t understand why that’s not addressed in the LOI, before we go forward and spend another dime on this process.”

Board member Connie Sipe, a lawyer, proposed amending the letter of intent to make sure the fatal flaws were fixed first.

“So that tentative agreement must be reached on certain fundamental issues before further negotiations. These fundamental issues would include how Native preference hire would be addressed in any new entity, how equal patient access would be guaranteed in any new entity, and how governance would be structured to maximize local control, and guarantee continuation of the agreements about fundamental issues into the indefinite future.”

Although the board was satisfied with the letter as amended, many in the audience were not. Beth Kindig works in medical records at Sitka Community.

“To me, right now with the facts as I understand them, I feel SEARHC won’t agree to the deal we are expecting, and I feel there will be a significant loss of jobs. If we back out after the next step of lawyer fees, we are that much more in the hole. So my question is: Is the city assembly and the hospital board seeing the vision of a separate entity that is mainly Mt. Edgecumbe Hospital and Sitka Community — with equal governance and no hiring preference — as an idea that can succeed?”

Dr. Richard Wein argued that the hospital board had capitulated to ECG’s assessment of the situation, and the board’s failure to defend the hospital amounted to “killing the patient.”

“Kevin Kennedy of ECG gave this hospital a death sentence in three-to-five years. And if you don’t think that changes the perception of how you view your job, how you view your organization, how people view us, you’re just simply out of touch.”

Kevin Kennedy is the lead ECG consultant on the project. Wein urged the board to allow CEO Allen to move forward with making Sitka Community competitive on its own, or to “get on with it” and merge. But he warned:

“I don’t think SEARHC is necessarily the best shepherd for health care in the future for Sitka.”

Those sentiments were echoed by one of the few non-employees present. Kalen Robbins owns a taxicab company in Sitka which accepts SEARHC’s Medicaid vouchers for patient transportation.

“I’ve found SEARHC to be absolutely horrible when it comes to certain ideas. They have their way of doing things. And I’m not trying to get into prejudice at all, but it sometimes feels like they have their feet on somebody’s neck and they like to push really hard.”

Board member Connie Sipe reminded the audience that they were a relatively new board, charged with resolving Sitka Community’s ongoing financial crisis. The letter of intent — along with a final decision whether to proceed with it — would now be going to the Sitka assembly.