Clarion file photo Kenai Peninsula Borough Mayor Mike Navarre proposed unifying Central and Southern Peninsula Hospitals during a recent healthcare task force meeting.

Mayor proposes unified hospital service areas

The Healthcare Task Force zeroed in on the hospitals at its Wednesday night meeting.

At its third meeting, the Healthcare Task Force heard from the representatives of Central Kenai Peninsula Hospital Service Area Board and the South Kenai Peninsula Hospital Service Area Board about their roles in hospital operations. Borough mayor Mike Navarre also gave the borough administration’s recommendations for connecting the hospitals in Soldotna, Homer and Seward.

The borough owns both the Homer and Soldotna hospitals, but the hospital in Seward is operated by private company, Providence Health & Services, and owned by the city. Homer and Soldotna’s hospitals, on the other hand, are operated by nonprofits and advised by elected hospital service area boards.

The separate delivery systems and administrations lead to disconnection, however. Navarre pointed this out in his presentation, in which he advocated uniting all three hospitals under one operating umbrella.

“There has been some ongoing communication, but there’s very little cooperation between Central Peninsula and South Peninsula,” Navarre said.

The hospitals would be combined into a single administrative entity under the plan, potentially with community advisory boards and one hospital board. The borough would have health powers, allowing the assembly final say to administer the hospitals. The plan differs from past suggestions to unify the service areas because it would encompass all the residents, including those in places like Cooper Landing, who would previously have been outside the service areas.

“I guess it’s the entire peninsula we’d be talking about being part of one system,” Navarre said. “It would be all-inclusive, and you might be able to pick up some additional gaps.”

Navarre said combining the service areas would lead to cost savings in billing and referrals. Physicians would be have privileges at all the hospitals as well, leading to greater resource efficiency, he said.

The funding would be designated from the general funds at the borough. The South Peninsula Hospital service area has a much higher mill levy than Central Peninsula, instituted to pay off its bond indebtedness — 2.3 mills versus .01 mills. If they were combined, the overall mill levy would come to approximately .53 mills borough-wide, Navarre said.

The borough has long debated the issue of how to handle the hospitals. Homer has had a hospital since 1956, but the service area was not established until 1969, when the hospital’s name changed from Homer Hospital to the South Peninsula Hospital. The hospital has expanded several times, issuing public bonds to pay for the construction. As a small rural hospital, it sometimes struggles with funding.

Central Peninsula Hospital’s hospital service area board, also established in 1969, was initially appointed, abolished in 1992 following the creation of CPGH, Inc. and restored in 1997 as an elected body. The hospital has grown rapidly and the borough has debated selling it or partnering with a for-profit entity to help operate the hospital.

Navarre said one of the growing concerns is the number of rural hospitals nationwide that have had to close because of financial strain. Since 2010, more than 56 rural hospitals have closed their door nationwide, according to the North Carolina Rural Health Research Program. None of those have been in Alaska.

Navarre said he understands the concerns about monopoly-building and that some communities want to maintain a close hold on their hospitals, but changing it could bring down the cost of health care.

“I would say that if we had one structure, we’re always going to have some independent physicians,” Navarre said. “I don’t think we’re getting too big. All we’re trying to do is find some economies of scales and efficiences. As you get to a combined type of structure, you might see some (health) services that could be done on the peninsula and make for more convenience for our residents.”

The borough has the option of selling the hospitals or arranging collaborative agreements between the separate entities, but combining them under one authority is more efficient, he said.

“We could stay the way we are, stick with the status quo, bury our heads in the sand, wait and see what happens instead of plan and prepare,” Navarre said. “There is significant potential that I could be wrong. But the data and the trends and the information that I have seen … caused me a great deal of concern. I am far more concerned that I could be right than I could be wrong.”

Several members of the task force raised concerns about the technicalities of the recommendations. Blaine Gilman, the assembly representative from Kenai who also sits on the task force, asked whether it would actually save money to combine the service areas.

He also asked when the hospitals would receive notice that the operating agreements would not be renewed or would be changed.

Gilman said he was concerned that a larger system could have the same problem as Central Peninsula Hospital has at present — care is expensive to keep the mill rate low and keep the hospital profitable, increasing about 10 percent annually, he said.

“There’s a tension between making this regional system profitable and the cost of health care,” Gilman said. “We’re so concerned with the fact with making sure that our regional hospital is profitable that we lose sight of the cost of health care to the individual.”

Navarre acknowledged that not all the questions had been answered yet and said because the Central Peninsula Hospital’s lease does not expire until 2017, the borough has until the end of 2016 to notify the board. South Peninsula Hospital’s agreement ends in 2019.

He recommended a timeline he called “aggressive,” which would present the idea to the assembly early next year and go to the polls in the October 2016 election. This is partially because he will be leaving office in 2017 and wants to get some of the issues worked out before then, but also because the proposed unified system will take a long time to perfect, he said.

Pushing the strategy to the polls could have good and bad effects — both the state and national elections also fall in 2016, he said.

“2016 is going to be a year when we will be inundated with presidential ads, and state and national election ads,” Navarre said. “It’s possible and something we should evaluate that we look at the possibility of doing it at a later date, depending on how things come together.”

Navarre said that if the task force and assembly decide to move forward with the strategy, the administration will host community outreach sessions and engage a consultant to implement the system. Other municipalities in the country have implemented similar systems, so consultants who worked on other projects may be able to offer advice, he said.

“Change is going to happen anyway,” Navarre said. “The system we have in this country and in the state is simply and unequivocally not sustainable.”

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

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