A new company's proposal to build an ambulatory surgical center in Kenai has caused uncertainty in the local medical community and Central Peninsula Hospital officials to ready their defenses.
Kahtnu Ventures, LLC recently filed an application for a certificate of need with the Alaska Department of Health and Social Services for an 8,365 square foot "ambulatory surgical center."
According to the application, the company hopes to build the estimated $8 million facility by spring of 2013 and service the Kenai and Northern Kenai Peninsula area. Further details about the proposed project haven't been released to the public.
Ryan Smith, Central Peninsula Hospital CEO, said the origins of the company are somewhat mysterious.
"None of our physicians have professed to have any knowledge of being participants in either the LLC, or as potential partners with that LLC in building a surgery center," he said.
The only contact listed for the company - a Seattle based lawyer - said he could offer no comments on either the company or the proposed surgical center.
Smith said if the center is approved after the required lengthy public process, it could spell financial troubles for CPH.
Lore Weimer, Central Peninsula General Hospital Inc. board president, agreed.
"We can't wait to see the outcome of the CON application," she said. "We have to start acting now."
Smith said no official actions have yet been taken by CPH or the CPGH Inc. board, but such a proposal could take away a significant portion of CPH's outpatient surgeries.
"It has big implications to the hospital and to the medical community," he said. "In order to protect the interests of the Kenai Peninsula Borough and the taxpayers and the community, then hospitals traditionally have some defensive moves they could take to try and prevent or challenge the certificate of need application.
"In other words, what are the things that we need to do so that if a surgery center was built, we could make the impact on us as low as possible."
Karen Lawfer, CON Coordinator for the Department of Health and Social Services, said the proposal is currently in the public notice phase. Anyone else interested in providing the same service can submit a letter of intent to file a CON for a concurrent review before Oct. 4.
If no letters of intent are received, then the application becomes open to the public and a public meeting will be hosted, Lawfer said. Public comment will then shape a recommendation to the commissioner of the Department of Health and Social Services, who has the final say on the project.
"We have very specific criteria we use to review an application," Lawfer said.
Smith said it would be possible, but highly unlikely that CPH would propose building a similar facility.
"We have the capacity to do the surgeries here in the hospital, so we don't feel the need to create an $8 million structure to do something that we can already do here," he said.
Currently, the hospital does about 3,000 outpatient surgeries per year, Smith said, and the number of those surgeries that would be taken away would likely be influenced by which CPH surgeons sign on as partners at the surgery center.
"Again, we don't know who they are so it is hard for us to project what those volumes would be," he said.
Research shows, Smith said, that hospitals can lose up to 77 to 80 percent of their outpatient surgeries when a surgery center opens in the area.
"We would stand the risk of losing about $12 to $18 million in revenue at the hospital that might be moved to an outpatient surgery center," he said. "It's enough to have a significant impact for us."
Much of the time, Smith said, the centers attract the "paying patients" and the hospital is left with the "non-paying patients" because of their care obligations stipulated by the Emergency Medical Treatment and Active Labor Act.
"It is really left up to the investors (of the center) to determine which surgeries they want to do there or not," Smith said.
Currently, CPH has about a 65 percent utilization of its three operating rooms, c-section room and procedure room. A fourth operating room is currently being set up.
"Generally with operating rooms when they get to be 70 to 75 percent utilized, you would say they are kind of stressed so we're creating 25 percent more capacity in our ORs by adding the fourth room." Smith said. "We feel like we have plenty of room to handle the new service lines that we are adding."
It's no mystery that surgery is one of the more profitable lines of care the hospital offers and a drastic cut to that revenue stream could put staff and other care programs at risk, Smith said.
"The profits that we generate from our surgeries helps to support the fact that we have a 24-hour emergency room," he said, "that we provide charity care for patients who can't afford to pay, we have services like Serenity House, our residential treatment center, sexual assault response team, our programs that don't generate revenue to pay for themselves."
Weimer added the employees affected could include staff outside of the surgical field including laboratory, imaging and others.
"Pretty much every element of an organization is affected when you reduce volume that substantially," she said.
However, Lawfer said the state considers a variety of factors when determining if there is a need for additional medical services in a community, particularly if the services are and will be used to their "best extent."
"Many of the areas have a hospital that must maintain a 24/7 and we do really want to make sure the services are available," she said, "and that when those services are provided that it doesn't prove a detriment to someone operating as a 24/7."
Although the application for the surgery center is new, it's not a new concept altogether, Weimer said.
"As board members we have had conversations about this potential for as long as I have been on the board," she said.
That doesn't mean they won't be taking the center proposal seriously, Weimer said.
"We don't know exactly what we are posturing to protect ourselves against," she said. "But, based on history, you have to assume what it is and go ahead with your plans."