In September 2016, Sitka’s two hospitals began exploring an affiliation with the intent of maintaining their independence. Two years later, the are negotiating a merger (Photo courtesy SEARHC)

The City of Sitka is preparing to negotiate with the Southeast Alaska Regional Health Consortium over the future of Sitka Community Hospital. Some of the biggest unknowns were answered this week, while other questions hang in the balance.

On Thursday night (09-28-18), the Sitka Assembly met Sandra T. Johnson. The attorney will protect the city’s interests throughout negotiations with SEARHC. The Assembly appropriated $150,000 in legal fees to hire Johnson and signed a letter of intent, or LOI. Both measures passed 6-1, with Richard Wein voting against.

Watch the full meeting here

Johnson said she’s done 30 similar transactions with hospitals around the country. She said the LOI is not intended to be a binding agreement. Rather, it’s a way of saying to SEARHC, “We like your proposal. Let’s negotiate.”

View a draft of the Letter of Intent (LIO) here.

The LOI asks both parties to negotiate in good faith, using their “best effort” to enter into a definitive agreement by February 1st, 2019. The LOI ends on September 30th, 2019. If if it is terminated before then, the offending party will have to pay a break-up fee of $500,000 to the other.

Assembly member Bob Potrzuski asked if nine months was a reasonable amount of time to reach resolution. Johnson responded by saying, “In my part of my country, we say ‘Good lord willing and the creek don’t rise.’ In legal terms, what I’m saying is, if everything goes right and if we can come to agreement on terms that protect the community and protect its healthcare and safeguard its future and do all the things we’ve been tasked to do in that amount of time, sure.”

A handful of citizens felt the process was moving too quick for comfort.

They condemned the actions of the Assembly majority for signing the LOI prior to the October 2nd election. Assembly member Richard Wein agreed and told the body that in approving the LOI, they were tying the hands of the future Assembly.

“I understand the break-up fee. I understand all of this. But timing is everything. Do you think – and again, I’m sure I will raise the ire of the body – but do you think that the 27th of September was some random date? Do you know we have an election on October 2nd where there may be a completely new Assembly,” Wein said.

However, the Assembly majority urged the process forward and approved the LOI with some edits to the language. The interim operating covenant now prohibits Sitka Community Hospital from making un-budgeted capital expenditures and changing employment without the approval of the city administrator.

After approving the LOI, the Sitka Assembly entered executive session for an hour.

Upon return, they named the team that will negotiate with SEARHC. Representing the city will be City Administrator Keith Brady, City Attorney Brian Hanson, outside legal counsel Sandy Johnson, consultants Sarah Cave and Steve Huebner, and two individuals yet to be determined from Sitka Community. One will be from administrative staff and the other from medical staff.

Earlier this week, the Sitka Community Hospital Board approved extending the current contract of CEO Rob Allen for another year. Allen said his focus over the next months is to maintain high quality healthcare at Sitka Community, while supporting due diligence as SEARHC and the city negotiate for the first time.

‘It will be challenging. There will be bumps in the road for sure. It can be done, but we just have to figure out how to get there,” Allen told KCAW.

The hospital board will vote at their next board meeting on October 25th  on whether to continue installing a new medical records system at the hospital. Allen recommends they put the project on pause to see how the negotiations shake out.