District recommends changes to hospital contract

The Kenai Peninsula Borough School District’s Board of Education wants a different billing arrangement with the Central Peninsula Hospital, according to a letter from the board to the Kenai Peninsula Borough Assembly.

“We would like to propose that the borough investigate the possibility of establishing, via the operating contract, a billing arrangement wherein the (borough) and (school district) health care plans are charged for services equal to approximately the Medicare reimbursement rate plus 25 percent,” the letter states.

Currently, the hospital establishes a retail cost of services, which is then discounted by 25 percent for the school district.

“We have no idea how those are calculated,” the letter says. “…With the provider establishing the starting number (retail) the question becomes; is 75 percent of retail really a value?”

In comparison, the district hopes for the hospital to base their pricing for the district off of the Medicare reimbursement rate plus 25 percent, meaning the district would be charged at 125 percent of what a Medicare patient would be charged.

“Ostensibly, this would provide the hospital with enough payment to cover the costs and make some margin on those efforts and, at the same time, provide local publicly funded health care organizations some relief from the current billing policies,” the letter says.

“We are aware that this proposal would do nothing to benefit the balance of our community,” the letter states. It continues to recommend that anyone able to pay cash for their services and living within the hospital service area receive the same billing structure.

“We understand there are pitfalls but, the borough and district pay cash and that seems fairly straightforward,” the letter states. “Lower annual health insurance bills to KPBSD would indirectly benefit all borough taxpayers.”

The letter, which is signed by Board of Education President Joe Arness, received approval to be sent during Monday night’s meeting.

“I think it solidifies where we’re coming from, that we’d rather operate under a cost plus (a discount), than from a discount that is based on a retail price that is just thrown out there,” Board Member Zen Kelly said. “I do think it’s important that we provide this letter to the assembly and provide this suggestion. I’d like to see how this works out being moved down to the Southern Peninsula for that hospital as well.”

All board members supported sending the letter, which was a culmination of the board’s health care cost committee meetings.

“My motivation behind the letter is to save money for the school district, which benefits the kids,” Board Member Mike Illg said.

The borough assembly is scheduled to finalize a 10-year contract with the hospital by August 1, with the current contract ending on December 31, 2017.

“We have an artificial date of August 1,” Borough Assembly Member Wayne Ogle said at the meeting. “I could care less if that date is upheld or not, if we have more issues to talk about I think that can be extended. …If it’s helpful for the school district, bring it forward.”

In 2016, the school district spent about $24 million on health care, a number that has been steadily growing and putting pressure on the district’s operating budget.

“In the last five years, arguably every dollar that we have requested in increase funding from the borough has gone to the hospitals,” Arness said. “That’s kind of a stunning statistic if you think about it, given that we own the hospital. We want to have a viable hospital, for sure, that hospital is very viable”

The borough owns the assets of the Soldotna-based hospital, and leases them to the nonprofit, Central Peninsula General Hospital Inc., for daily operations. The lease and operating agreements currently being negotiated outline terms of how the nonprofit will run the hospital.

“All this is, is a suggestion that is being given to the assembly,” Arness said. “They will take that suggestion and discard it outright, or decide that they’d like to try this line of approach.”

Reach Kat Sorensen at kat.sorensen@peninsulaclarion.com.

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