(L to R): Stroudwater Associates’ Eric Shell and Jonathan Pantenburg sit alongside Sitka Community Hospital CEO Rob Allen at the Assembly’s work session on Thursday. (Emily Kwong/KCAW photo)

In order to survive, Sitka Community Hospital will have to adapt. That was the message of Stroudwater Associates to the Sitka Assembly during their work session on Thursday (7-13-17), who also noted the hospital will have to align with the Southeast Alaska Regional Health Consortium.

Stroudwater prepared a 100-page report, detailing what changes could save the hospital major dollars.

See a Powerpoint of Stroudwater’s report here: Stroudwater Presentation to Sitka Assembly

Stroudwater Director Eric Shell said the initiative with the biggest financial reward is changing how the beds are licensed. There are 15 beds for long-term care patients. But if the beds were converted from skilled nursing facility beds to swing beds, the hospital would qualify for more Medicare reimbursement. And, Shell added, patients wouldn’t notice the difference.

“This has been going on in states in Washington, in Oregon. We did it with a hospital in Maine and in upstate New York. Just this conversion and the way the cost report works, rural critical-access hospitals are able to pick up some pretty decent returns. The impact on your organization was about $1.1 million,” Shell said.

If the hospital makes these changes, Stroudwater forecasts Sitka Community Hospital would gain $24 million in net income and cash position in the next decade (the red line). If none are implemented, they predict negative financial performance over time (blue line). (Stroudwater Graph)

Converting those beds would take the approval of the state, while other changes can be made internally. The Stroudwater report also recommends making surgery a scheduled affair, five days a week instead of 24/7, and ending the labor and delivery program. Sitka Community Hospital’s board would need to authorize those changes and the budget as written sets those wheels in motion.

Listen to Part 1 of the meeting here: Downloadable link

Listen to Part 2 of the meeting here: Downloadable link

Listen to Part 3 of the meeting here: Downloadable link

Shell’s final recommendation is to increase patient volume at the clinic. Mountainside Family Healthcare receives about 10,000 visits a year. He wants that number to increase by 2,500 and thinks the hospital’s future is in wellness programs.

If all these changes are made – and that’s a big if for the Assembly – Shell argued it would bolster the hospital’s bottom line. His model forecasted the hospital increasing its net income and cash flow by $24 million in ten years.

But in those ten years, how will competition from SEARHC affect Sitka Community? That was the question of Assembly member Kevin Knox. Schell responding by saying that two hospitals must work together in the future. 

“As the payment systems transition to this new environment, alignment is going to become key. I think over time there’s going to be an increasing imperative for these two organizations to work together. That doesn’t have to be today unless it’s mutually beneficial to both organizations. And I’d like to think there’s some opportunity for that to happen,” Shell said.

That comment caught the ear of Deputy Mayor Bob Potrzuski.

“I think that was a really brave statement on your part,” Potrzuski said. “And an honest statement on your part. I don’t know if you were planning on saying that, but I think that was a very important thing to say and I appreciate your honesty on that.”

On Tuesday July 18th, the Assembly will formally consider SEARHC’s proposal for merger as well as Stroudwater’s model for keeping Sitka Community Hospital independent. They’ll choose which direction to move forward in, which could also include issuing an RFP and putting management of the hospital out to bid.

Raven Radio will broadcast the meeting live starting at 6 p.m.