Assembly approves 10-year agreement with CPH

The Kenai Peninsula Borough and Central Peninsula Hospital have a contract for the next decade.

The Kenai Peninsula Borough Assembly approved an operating agreement for the Soldotna-based hospital with Central Peninsula General Hospital, Inc., the nonprofit that operates the borough-owned hospital, at its meeting Tuesday. The new agreement goes into effect Jan. 1, 2018.

The new agreement, renamed an operating agreement instead of the former title “lease and operating agreement,” sets out specific rules like how the nonprofit will execute bond financing, use funds to repair or replace equipment and rent real estate, among many other details. The agreement also details how the nonprofit board will communicate with the borough administration and assembly, including a new requirement of monthly meetings with the borough administration.

In general, the assembly supported the agreement, but stuck on one point — the term length. Several members felt the 10-year term length was too long and wanted to see it shortened to five years. Assembly member Wayne Ogle proposed an amendment that would have reduced the term to five yeas and deleted the option for automatic renewal.

Ogle said that with the national health care industry in constant flux, the borough may want to keep tighter reins on the hospital’s activities. A five-year term would also require the borough and hospital to renegotiate every five years, while a 10-year contract may result in a decade of accumulated issues, he said. The two public employee unions at the borough have three-year contracts as well, he said.

“Bigger, better and more intense has not always got positive signs,” he said. “I do believe that a shorter duration would bring a bit more focus on CPH to the needs to the community. It’s kind of like the House of Representatives to the United States — two-year terms have a lot more razor-sharp paying attention to the local needs of the people they represent.”

Executives from the hospital and nonprofit board pushed for the 10-year agreement, saying it gives the hospital more stability amid a fluctuating market. Central Peninsula Hospital’s administrators have been saying for several years that they expect a large financial contraction on the health care industry’s revenues due to the Affordable Care Act, and in the most recent quarterly report showed a 91 percent decline in revenue in the third fiscal quarter as compared to the previous year. CPH CEO Rick Davis has said the bond-financed expansions in facilities and investments are to help offset future challenges.

At the meeting Tuesday, Davis said in his testimony that the 10-year contract may provide more stability for the hospital that the borough will appreciate as the health care industry continues to change.

“We’ve been fortunate to be able to stay ahead of some of the wolves that have pounced on hospitals in the Lower 48, but we definitely have more difficult times ahead, which I think you’re going to be glad we do have a 10-year agreement when those times do come because it’s more than likely going to be the hospital side saying, ‘Hey, we’ve got problems here,’” he said.

Other members of the assembly wanted to delay the agreement entirely because Borough Mayor Mike Navarre will leave office in October. Assembly member Paul Fischer said he thought the assembly should extend the current contract for a year and leave it up to the next mayor to negotiate the contract. He said one of the arguments the hospital used to support the 10-year agreement — which was that recruiting doctors would be harder if the hospital did not have long-term security — didn’t make sense.

“I think that doctors that do come in don’t come in under a 10-year agreement that they’re going to be here for 10 years,” he said. “… I think five years is a compromise and just to go 10 doesn’t accomplish anything.”

Navarre said his administration had put more than a year of work into the review and negotiations, and to delay the contract would start that process over with a mayor who would have a steep learning curve to become familiar with hospital issues. He defended the 10-year term length, saying that the new contract includes a number of additional reporting requirements meant to keep the borough assembly more in the loop on hospital operations.

Since the 2016 dissolution of the Central Kenai Peninsula Hospital Service Area board, the borough assembly is technically the elected service area board for Central Peninsula Hospital, but the operations of the hospital are in the hands of the nonprofit operating board, which does a good job operating the hospital for the borough, Navarre said. The assembly should let the board operate independent of the borough’s politics, he said.

“Part of the problem in health care is that there are so many vested interests,” he said. “…If you politicize it, it makes it that much more difficult to have any kind of continuity and ongoing success with the hospital structured the way that we have it.”

Assembly President Kelly Cooper, who previously served on the board of South Peninsula Hospital, the borough-owned hospital in Homer, said she supported the 10-year contract to provide the hospital stability. The hospital is increasingly a necessary part of the economy and quality of life on the Kenai, she said.

“This protection is in here for the assembly, but our boards and our hospital have to be able to provide that campus because before, when people had cancer or needed cancer treatment, they were sent to Anchorage or to Seattle,” she said. “Now their family members, (who are) going to be able to help you recover, are going to be able to see you right here.”

The assembly ultimately voted down Ogle’s amendment 6-3, with Ogle, Fischer and assembly member Stan Welles voting for it. On the final vote, the agreement passed 7-2, with Welles and Fischer voting against it.

Reach Elizabeth Earl at elizabeth.earl@peninsulaclarion.com.

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