Two entities have proposed building a multi-million dollar cancer treatment center in the area, but both contend the area can only support one -- and neither one is currently backing away from their plans.
Central Peninsula Hospital, under the direction of Chief Executive Officer Rick Davis, and the newly formed Peninsula Cancer Center, under the direction of Anchorage-based Dr. John Halligan, want to bring radiation oncology services to the area.
Peninsula Cancer Center wants to build its own facility off, but near the Central Peninsula Hospital Campus in Soldotna, own the land it sits on and charge for both professional and technical fees associated with cancer treatment. It expects to treat about 350 patients per year who would otherwise go to Anchorage or Seattle for care, and has already purchased land.
CPH wants to build a facility to house radiation oncology services and eventually others as part of a larger cancer treatment operation on its campus and lease out the building to radiation oncologists, who would still collect the professional and technical fees.
"The radiation oncology is basically phase one of a bigger project," Davis said.
A key part of building any cancer center is purchasing a linear accelerator, which is used in radiation oncology. If a hospital wants to put in its own accelerator, it would need to acquire a Certificate of Need from the state. But, if a private physician wants to purchase and install the same piece of equipment, he or she doesn't need a CON because the state views it "like a doctor putting in a piece of equipment for his own patients," Davis said.
Any building would likely cost millions in addition to the multimillion-dollar linear accelerator.
The CPGH Inc. board unanimously approved Jan. 26 a resolution to move forward with planning of the center and to request fund allocation from the borough, which would require further judgment from the assembly. Borough Mayor Mike Navarre said the item would be introduced at the assembly's Feb. 14 meeting, but a decision would likely be made in March after public comment.
Davis said CPH has been examining the possibility of bringing cancer services to the area for a long time and had been in discussions with Halligan since early 2011 under the supervision of former CEO Ryan Smith, along with Dan Moore, CEO of the Tennessee-based health care management company RBS Evolution, who is handling Halligan's proposal.
But the two sides disagree on what was said during the time from August, when serious talks started between the two, until late December when CPH sent out a request asking for Alaska radiation oncologists to bid on providing services in the area.
Halligan said he was surprised by CPH's announcement it would build its own center.
"There was a sudden difference -- Rick used the words, 'Plans have changed' and he basically said, 'We are going to build the cancer center on the grounds of the hospital as part of this big project,'" Halligan said.
"We felt this was rather a dramatic change and not in the hospital's best interest because they are going to spend several million dollars to build this hospital when we are offering to bring it down there at no cost to the hospital and actually make money for the hospital."
Smith, now the CEO for Memorial Hospital of Converse County in Wyoming, and Davis both said there are currently only two radiation oncologists in the area -- Halligan and Dr. Richard Chung of the Anchorage & Valley Radiation Therapy Centers.
Halligan currently is referred the "lion's share" of Peninsula cancer patients to treat in Anchorage, Smith said. However, Halligan only receives fees from professional services because he was recruited by Providence Cancer Center, who owns the radiation facility and equipment, he said.
Davis said Wednesday he did not receive a letter of interest to partner on CPH's proposal from Halligan, but did receive a letter showing interest from Chung.
"We are committed to go ahead and build the cancer center," Halligan said.
"Right now I am expecting them to change their mind and try to partner with us because our deal makes a lot more sense theirs does," Davis said.
* * *
Both sides' argument comes back to whether or not the center should and can be located on CPH's campus. If Halligan's center is built, inpatients at CPH would need to be transported via ambulance to receive care.
"I don't think you could find anyone who doesn't agree that it is better to have radiation oncology on campus than it does off campus," Davis said. "It is closer to the services, the imaging and the lab and infusion and you have inpatients that require radiation oncology and if it is not on campus they have to be discharged from the hospital, put in an ambulance and driven across the street every day they are in the hospital to get their cancer treatments."
Halligan contends, however, the majority of cancer patients he would see are not inpatients.
"It would be by my estimate two or three patients a month might be inpatients being treated with radiation therapy for one or two days before they are discharged from the hospital," he said.
However, Halligan and Moore both said Smith "encouraged" them to build the cancer center off-campus in August and that CPH made it sound as if it wouldn't proceed with their plans.
"I didn't promise anybody anything," Smith said. "... We were interested in making sure residents on the Peninsula had those two services available to them on the Peninsula -- both medical and radiation oncology -- and we weren't exactly sure how we were going to get there, but it is very complicated how you get there.
"These guys in the meantime were sharks in the water smelling their opportunity to build a cancer treatment center and make millions of dollars ... by building a professional and technical component."
Smith said CPH was previously interested in working with the group, but disclosed it would need time to go through the processes required because of its status as a non-profit, government-owned hospital.
"Because we are owned and governed by the Kenai Peninsula Borough, our plans all get laid out in the public and everybody knows what we're doing and in the mean time these guys are going about securing land and building a cancer treatment center," Smith said.
Specifically, if the hospital were to build the center on campus, it would require an extension of the current lease and operating agreement -- the document that regulates hospital management responsibilities and actions among the Central Peninsula General Hospital Inc. Board, the borough mayor and assembly, and the Service Area Board.
"Or we could possibly make the building lease assignable to the next operator and have the lessee, the borough, and the board agree to that," Davis said.
However, the hospital was not willing to have those negotiations until after the borough mayor elections had finished in October and a new administration was seated, Davis said.
* * *
Halligan and Moore, Davis said, told them they didn't want to wait that long to build the center and asked about putting it where they are now proposing -- on the other side of the street from Peninsula Internal Medicine.
"We didn't have an answer for that because we couldn't move any faster," Davis said, citing both changes in borough and hospital administration and the required assembly process.
"We continued on like we said we were going to do even last summer," he said.
Moore took issue with that, however.
"If I would have had a tape recorder I could give you a direct quote, 'On-campus or off-campus isn't as important as bringing cancer treatment to the area,'" he said. "So we were very surprised with that statement when we said, 'We're bringing cancer treatment to the area' and they said, 'We don't want you to do that.'"
Moore said he and Halligan, who is also partnered with Anchorage-based Dr. James Blom, are far into the building process and plan to open the center by late August or September.
"It is unfortunate that this becomes a competition, when in fact there is really not enough patients to support one center," Moore said. "We were hoping to find a little more cooperative atmosphere and wait it out in anticipation of the growth of the area."
Smith said he told the group upfront that if the hospital builds the facility, the service and lease would be bid out. He also said the Peninsula Cancer Center proposal was a move to gain a "competitive advantage" over Chung while the hospital waited for a new borough administration to be seated.
"So instead of risking the competition of a bidding process, they went out and decided to acquire land and get a head start on building it because they wouldn't need a Certificate of Need to then put pressure on the hospital once we could talk to the borough about the best way to do and they would have an advantage," he said.
Moore said CPH's invitation to bid on the building was taken as a "frontal assault" on the group and "that letter was only sent out after they learned of our actions (that had) already taken place."
"To contact our competitors to learn of our intent?" he said. "I don't know how we can read it any other way. ... I think the hospital has already made their choice for Chung."
In a letter of intent dated Aug. 30, 2011, Moore wrote Smith about the group's proposal and asked for confidentiality in the development of several aspects of the cancer center, Davis said.
"I would be in jail if I signed this," Davis said. "We are a publicly scrutinized company that operates in the light of day and these guys were trying to get something done covertly. That is just not how we do business."
Said Davis, "I think they were seeing it as a 50-50 chance that they would be chosen as a partner and by acting quickly and getting ahead of our project, they probably hoped they could scare the other group off or scare us off."
* * *
Halligan presented his case to the board on Jan. 26 before the decision to move forward was made, specifically asking why CPH was supporting spending millions on a building "when you will make no more money than the project we are talking about where we build the facility, bring the money to the table and are using the radiology resources."
Halligan said he found several reasons the board's logic were "not satisfactory" to him.
"They said the board wants to be the landlord and then get income from the lease of the property to then have eventual ownership of the building with it being paid off," Halligan said.
He said was "disappointed" in that notion and the CPGH Inc. Board should not in the business of being a landlord.
Moreover, Halligan alleged a board member said if the hospital was the landlord, then CPH can "control" the practice. Although one person said it, "nobody disagreed with that person on the board."
"To me that was very disheartening that now the board is telling me not only do they want to force where we put the center, but they want to control it and I don't think it is the role of the board to control physician practices," he said.
Davis said the hospital wanted to be the landlord to ensure the building would be of quality, but that they would have as much control over the physician as a landlord has over a tenant -- "zero."
"The board members set the strategic direction, they hire the CEO and the CEO operates the hospital and I don't want to control anybody," Davis said. "We want to have control over the building. We want to have a nice, customer focused building just like our hospital is."
Halligan said the Peninsula Cancer Center would be "stronger-aligned with all the independent referring physicians."
"So I think the hospital will have very few patients being treated in their very expensive cancer center and I believe that could be financially detrimental to the hospital and they should not proceed that way," he said. "I think that is bad practice."
Brian Smith can be reached at firstname.lastname@example.org.