Mayor, CPGH, Inc. to mull operating agreement

Door to discussion

At last week’s Kenai Peninsula Borough assembly meeting, assembly members gave approval to a resolution allowing for changes to the document controlling the operation of Central Peninsula Hospital.


The assembly unanimously approved Resolution 2011-74, which authorizes Kenai Peninsula Borough Mayor David Carey to negotiate amendments to the current lease and operating agreement with Central Peninsula General Hospital, Inc.

The resolution spawned from the recommendation of the Health Care Task Force, which was created earlier this year to look at the future of the hospital, including its governance and ownership.

CPGH, Inc. had previously made a recommendation to the assembly to enter into whole hospital joint venture with the hospital where the borough or some other entity could own up to 50 percent of it, said CPH CEO Ryan Smith.

“The corporation has certain fiduciary responsibilities,” Smith said. “So this group had the fiduciary responsibility to go forward to the assembly and tell them, ‘Hey we don’t know if we have the best ownership and governance structure for this hospital in the long term.’”

However the assembly didn’t introduce the ordinance containing provisions allowing for that action and the task force was created to review CPGH, Inc.’s findings. The task force recommended it and the mayor explore changes to the current lease and operating agreement “to make the organization better able to adapt to the changes that will be coming in the future,” Smith said.

Essentially, everything is now on the table, Smith said.

“The whole thing is open for consideration at that point,” he said. “It is a 25-page agreement and so all of the terms in that lease agreement would be up for discussion.”

However, Smith said the option of going back to a whole hospital joint venture would “probably not” be a point of discussion.

Instead, the negotiations would allow both sides to make changes they see as necessary, such as possibly making things more flexible for the CPGH, Inc. board, protect the sides’ amount of control and how future, major capital decisions will be made, Smith said.

“You would basically have to give away the lease an operating agreement to sell the hospital or to sell some portion of the hospital,” he said. “The lease and operating agreement (might include that) there is a new partner at the end of that, or somebody else could be managing the hospital.

“But, I think the general consensus was that we wanted to maintain borough ownership — it’s just the relationship of how it is governed that is opened for dialogue.”

When asked what he would be discussing with the CPGH, Inc. board, Carey hesitated.

“One of the things we agreed to … was that while we are involved in discussions, we won’t give details of what we are talking about,” Carey said. “Basically we want to get some changes made and then once we get them made, we are going to let people know what they are and why.”

He went on to say the resolution outlines that the first priority of the talks is to make changes to the lease and operating agreement and second, if absolutely necessary, then talk about a whole hospital joint venture, Carey said.

“I can tell you absolutely there is no discussion going on at this time regarding any change in ownership of the hospital,” he said. “The resolution did mention that if things don’t work in terms of changes in the contract that we both agree need to be done … then they said I guess if we had to, we’d look at that option. But, I want to make it very clear that option is not being discussed.”

Carey said he believes the two sides have a common vision — “the importance of quality health care for residents and that it remain here and it remain located here and be controlled locally.”


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