SEARHC’s proposal to take over Sitka Community Hospital includes leasing the city-owned facility for five years, until it replaces its own, 70-year old facility pictured above. (SEARHC photo)

The Sitka assembly heard a pair competing proposals for the management of its community hospital Monday night (8-13-18), and the two could not be further apart. One would cost the city a half-million dollars a year for at least five years, with no guarantee that the hospital would be much better off in the future than it is now. The other would be a multi-million dollar buyout that would take the city out of the health care business altogether.

And there was a third option that no one saw coming.

Downloadable audio.

Note: The City of Sitka will hold a special town hall meeting to discuss the proposals for management of Sitka Community Hospital at 6 p.m. Monday, August 20, in the main auditorium of Harrigan Centennial Hall. A third proposer, Sitka Jet Center, did not present at the assembly work session, but its proposal — to buy the hospital outright — remains on the table.

The proposals were from Quorum Health Resources, a health care services organization based in Tennessee, with over 700 hospitals in its client portfolio in four decades of health care management, and from SEARHC, the Southeast Alaska Regional Health Consortium.

SEARHC is based in Sitka, but has grown over the years to serve 28 communities in Southeast Alaska. And since it began accepting non-beneficiaries, or patients who are not Alaska Native, SEARHC has also grown to become Sitka Community Hospital’s greatest rival.

Bill Donatelli, a senior vice president for Quorum, was not promising any miracles.

“We think, bluntly, if you want a competitive situation we’re in the best position to help this hospital compete financially, bringing in the resources and the expertise you need to survive,” said Donatelli. “But we do think it’s going to be awful tough to compete in a community with 9,000 people trying to support two hospitals.”

Basically, Donatelli said that Sitka Community Hospital and SEARHC were competing over 50-percent of the Medicaid/Medicare market in Sitka. The other half were seeking care out of town anyway.

Mark Armstrong, a senior vice president of consulting at Quorum, was no more optimistic.

“We think sustaining two hospitals in a town of 9,000 people is a very difficult row to hoe,” said Armstrong. “A hospital this size in a community this successful has to have 100-percent community support, and you have half the people leaving, or splitting between two hospitals. While we’re willing to give it our best shot, we really do think that long term it’s in the best interest of the community to have one organization, or a whole lot better collaboration than you had before.”

Still, Donatelli and Armstrong said Quorum would take on the management of Sitka Community Hospital, for a cost of $454,000 per year for five years, not including salaries of the hospital’s two top executives and travel reimbursements, and bring the full weight of the firm’s experience, resources, and purchasing power to help keep Sitka Community Hospital going.

But there was a Plan B — and it was the most surreal moment of the evening: For a one-year fee of $480,000, Quorum would ensure a smooth transition to new ownership.

“The second proposal we’re proposing is a short-term agreement to help you facilitate a smooth transition if you accept the SEARHC proposal,” said Donatelli.

But there was a Plan B — and it was the most surreal moment of the evening: For a one-year fee of $480,000, Quorum would ensure a smooth transition to new ownership.

“The second proposal we’re proposing is a short-term agreement to help you facilitate a smooth transition if you accept the SEARHC proposal,” said Donatelli.

That’s right: Two competing proposals, one of which involves helping the other guys win. Imagine watching the Super Bowl come down to a field goal, and the defense offers to snap the ball.

Sitka Community Hospital CEO Rob Allen had heard that Quorum had added an alternative to their proposal, “and for them to actually say that our recommendation is that you merge with SEARHC… I just like… what?” Allen remarked, clearly stunned. “I think that was the big surprise of the night.”

The assembly was also taken aback. Member Richard Wein, a Sitka hospital proponent and former physician at SEARHC, has a flair for the melodramatic, and he spared none in his antagonism toward what was looking a bit like an ambush.

“Come I to speak at Caesar’s funeral?” he intoned, quoting from Shakespeare’s tragedy.

So then it was up to CEO Charles Clement to demonstrate that SEARHC was worthy, capable, and motivated to take ownership of the health care system in Sitka. The offer, on paper, is compelling: A buyout of the Sitka Community Hospital for between $8- and $9-million, in lump sum or over time; a buyout of the city’s pension obligation to hospital employees for about $700,000; annual lease payments to Sitka of $140,000 for use of the hospital property for five years, until a new hospital is constructed on Japonski Island; and guaranteed employment for all current Sitka Community Hospital staff.

And to sweeten the deal — if it were possible to make it any sweeter — SEARHC would assume full financial responsibility for the hospital, and allow the City of Sitka to retain the full $900,000 it collects each year from the additional sales tax on tobacco.

But the assembly had concerns: Would SEARHC, as a compact among 15 Southeast Tribes, put the needs of the community of Sitka on a par with the needs of its traditional beneficiaries?

“You stated it like it was an inconceivable notion that we would have to deliver assurances,” Clement replied. “I agree with you. If we’re not living up to our end of the bargain, there need to be assurances, and there needs to be recourse.”

There’s also some historical antipathy toward SEARHC and its management practices. When Clement took over as CEO in 2011, SEARHC was deep in debt, and hamstrung by inefficient financial systems. There were significant layoffs — the elimination of entire departments — that stung in Sitka and other communities.

SEARHC has turned things around, but the memory lingers. Clement said that his offer was “not without controversy on both sides, but I can tell you as someone who’s been doing this for 20 years: What path offers the best chance for success? It is not the status quo. It is certainly not the status quo. It will not lead to what this community deserves.”

Or is the status quo a perfectly acceptable option? Sitka Community Hospital CEO Rob Allen thinks so. Allen took over the hospital in 2014 when it too was in financial jeopardy due to inefficient systems. It’s since paid down its debt, and has put money in the bank.

Allen wasn’t invited to present a proposal at the work session, but he says the hospital — by closing its obstetrics program and on-call surgical practice — has found a “narrow path forward.”

“I still feel — and I think I’ve been consistent — that we’ve got the next couple of years covered, as long as we don’t have something unexpected happen,” said Allen. “We have the resources to get through the next couple of years, and set ourselves up for better success in the future.”

The Sitka Assembly will deliberate the future of Sitka Community Hospital as its one-and-only agenda item at its regular meeting on Tuesday, August 28.

SEARHC CEO Charles Clement testifies before the House Natural Resources Committee in Washington D.C. Referring to the age of Mt. Edgecumbe Hospital, he said “Something’s got to happen in Sitka.”

A bill transferring over 19 acres of federal land in Sitka to the Southeast Alaska Regional Health Consortium — or SEARHC — has passed preliminary committees in both the US House and Senate.

Downloadable audio.

House Resolution 1901 was introduced by Congressman Don Young in April. A nearly-identical version of the bill, S. 825, was introduced into the US Senate by Lisa Murkowski on the same day.

The bill transfers lands currently owned by the Indian Health Service and gives them to SEARHC at no cost. SEARHC already occupies much of the land anyway, and has been maintaining it for over two decades, according to CEO Chuck Clement.

A map from an information sheet supplied to members of the Subcommittee on Indian, Insular, and Native Affairs. The SEARHC campus already includes much of the property in question. At left, a proposal for a new hospital building.

Clement testified in Washington DC earlier this month (6-7-17) before the House subcommittee on Indian, Insular, and Native Affairs. He told House members that SEARHC needed the land to replace Mt. Edgecumbe Hospital.

“Our tertiary care hospital is located in Sitka, Alaska. It’s the only hospital we operate. It was built by the Department of War approximately 70 years ago. As you can imagine, over the course of 70 years in Southeast Alaska, it’s been very difficult on the facility. And there’s a great need to update, upgrade, and replace the facility. And given the current circumstances within the Indian Health Service, with regard to replacement facilities in Indian Country, we’ve taken it upon ourselves to work collaboratively with the IHS to find the best and most prudent way to go ahead and replace that facility.”

The bill transfers the land under a so-called “warranty deed,” which guarantees SEARHC full title, and protects the organization against claims by other possible owners. A quitclaim deed would only transfer title, with no guarantees.

Congressman Don Young asked Clement — on behalf of the IHS which could not send staff to the hearing — why a warranty deed was so critical.

Clement — Something has to happen in Sitka, there has to be some level of development. And in order to engage a financial partner, whether it’s the Alaska Bond Bank, whether it’s a private financial institution, whether it’s open bond markets, we are going to need to take loans on that land, and quitclaim deeds will just not cover that level of financial committment that’s going to be required.
Young — I thank you for that answer. We have transferred five other pieces of property under warranty deed. I was curious why they were saying it had “limited aspects.” We will pass the bill with “warranty deed” with the help of the chairman and the ranking member, because you just want to build a new hospital. I’ve been in this hospital — by the way, SEARHC does a great job, but the buildings are 70 years old.

H.R. 1901 passed the House subcommittee. A week later, S. 825 was heard in the Senate Committee on Indian Affairs and also passed. Both bills will likely be heard in at least one other committee in the House and Senate, before being combined into a single bill.

As part of its expansion plans, SEARHC has proposed buying out Sitka Community Hospital and converting it into a long-term care facility. All acute care in Sitka would move to Mt. Edgecumbe Hospital, and then its replacement if one is built.

SEARHC medical director Dave Vastola, M.D. (foreground, left), and CEO Chuck Clement make the case for the $6.5 million dollar takeover of Sitka Community Hospital, during a May 30 meeting with the Sitka assembly. (KCAW photo/Emily Kwong)

The Southeast Alaska Regional Health Consortium presented its proposal to take over Sitka Community Hospital this week (Tuesday 5-30-17) — a cash offer that the Sitka assembly will take a hard look at in the coming weeks.

But the deal is much more than a real estate transaction. There is a long history of tribal health in Sitka — a history rife with highly-charged issues of patient access, hiring practices, and racism.

After SEARHC’s lengthy presentation, the Sitka Assembly dove in and began to question SEARHC’s top management directly about the issues.

Downloadable audio.

So it was assembly member Bob Potrzuski, naturally — a former high school teacher and basketball coach — who put the ball in play for SEARHC’s CEO Chuck Clement.

Potrzuski – I don’t know how to delicately put this, but it’s been brought to my attention over and over again — and I think I know the answer. In timeliness of service, is ethnicity a factor?
Clement – No. When someone calls to make an appointment — when I call to make an appointment — it’s just the person at the end of the line.
Potrzuski – If we’re in a triage or emergency situation?
Clement – No. If you walk into the ER you’re going to get seen based on the level of care that you need.

SEARHC medical director Dave Vastola agreed. “It’s simply not an issue,” he said. “Our patients are colorless.”

Potrzuski – I wish that we could say that more clearly, but that’s about as clearly as it can be said. So I hope the people who keep asking me that question have gotten a solid answer.

There is a rare exception, however. Vastola said that occasionally a visiting specialist from the Alaska Native Medical Center in Anchorage is required — by the mission of the ANMC — to prioritize Alaska Native patients. Vastola said that SEARHC has remedied that circumstance by hiring independent contractors for many specialties, like neurology.

But Vastola also had this observation: Concerns over the ethnic divide at SEARHC go both ways.

Vastola – I will tell you on the flip side since we’ve covered some history here. I’ve had the opposite question come to me from our beneficiary population, where in some of the communities we started seeing non-Natives. The clinic was typically a social place. People would go, they’d get seen, they didn’t necessarily have an appointment. We started getting patients in who didn’t have appointments. And they’d come in, it would be their appointment time, and they’d get seen. And it would be, Hey why’d that person go in front of me? Because they had an appointment and you didn’t, and that’s the way the scheduling rules work. It’s the same set of rules for every patient, whether it’s scheduling a routine appointment or receiving emergency care. We treat everybody the same.

Read SEARHC’s formal presentation.

Listen to Part 1 of SEARHC’s May 30, 2017 presentation to the Sitka assembly.

Listen to Part 2 …

Listen to Part 1 of the assembly’s questions for SEARHC’s Chuck Clement and Dave Vastola, M.D.

Listen to Part 2 …

Patient access was one of the major unresolved questions during SEARHC’s and Sitka Community Hospital’s efforts to create a joint venture last year. Another was Native preference in hiring. Mayor Matt Hunter said people frequently expressed concern to him about it. Clement, however, has never been anything but straightforward about the issue. Native preference is the policy.

“We continue to anticipate, under any scenario in which we move forward, that hiring practices will be the same. Which is: We are committed to being the employer of choice and hiring the most qualified candidate for any position. In the event that two candidates are legally qualified, we are legally required to give preference to the Native candidate.”

Another widespread assertion is that SEARHC is not good to its employees. Assembly member Kevin Knox asked Clement if there were objective measurements of employee satisfaction at SEARHC, and Clement responded that turnover and tenure were the most objective tools he had available, and the occasional survey of employee engagement.

Member Steven Eisenbeisz wasn’t quite satisfied.

“I never did hear the answer. Are your employees happy?” he asked.

Dr. Dave Vastola, who’s been at SEARCH over twenty years, was candid.

“Morale, like most things, waxes and wanes. I’ve certainly seen times when the employee workforce as a whole seemed happier than others.”

Vastola felt that SEARHC took pains to measure employee satisfaction at the department level, and engage the workforce “and address the things at the top of the list that made them most unhappy.”

And then there’s the hospital property itself. SEARHC is offering to purchase the assets of the hospital, and lease the land it sits on for five years at $600,000 per year.

What then? Asked member Eisenbeisz. Clement wasn’t sure.

“The real estate is not our primary interest in any potential deal. (As Mayor Matt Hunter pointed out) maybe that’s a future conversation. If the city felt that it was of value to the city, we would be open to just walking away from it. If the city felt it was a liability, I think we could come to some understanding of how to repurpose it. The sky’s the limit.”

Clement took over as CEO of SEARHC five years ago. He told the assembly that just one-quarter into his first year, the organization was already $7 million “underwater,” and he took out a loan on his first day of work just to make payroll.

Salvaging the SEARHC budget required some severe measures, and many in Sitka remember that important programs — such as the inpatient behavioral health clinic and an air ambulance service — were shut down. But it wasn’t half the staff.

“It was nowhere near 50-percent. And I can tell you to this day that it is something that affects me as a person.”

The Sitka assembly will take a month to consider SEARHC’s offer. Sometime later this summer — likely in July — they’ll hear a counter-proposal for sustainability by Sitka Community Hospital.