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State denies portion of CPH expansion

Hospital plans to go forward without endoscopy, MRI and CT programs

Posted: December 19, 2013 - 9:54pm
Photo by Greg Skinner/Peninsula Clarion The state recently denied a portion of Central Peninsula Hospital's plans to build an 89,000 square-foot specialty clinics expansion. The hospital is now waiting to hear if the state accepted its revised budget plan.
Photo by Greg Skinner/Peninsula Clarion The state recently denied a portion of Central Peninsula Hospital's plans to build an 89,000 square-foot specialty clinics expansion. The hospital is now waiting to hear if the state accepted its revised budget plan.

Central Peninsula Hospital is racing to get approval of their revised specialty clinic expansion budget after the state denied several key components of the original $43 million plan.

The project’s approved cost hinges on the ability to sell revenue bonds at a specific interest rate available in February, following a meeting of the Municipal Bond Bank of Alaska during the second week of January.

In November, the state denied a portion of the Central Peninsula Hospital Certificate of Need application for the specialty clinic’s expansion. The certificate is required for the bond sale to be approved.

The state made certification of the remaining plan conditional on the approval of the revised budget, which cut $4.6 million in equipment from the denied programs.

Kenai Peninsula Borough Mayor Mike Navarre and those favoring a revenue bond sale to fund a 89,000 square-foot hospital expansion implored the assembly in October to pass the resolution approving the bonds or, he said, plans could be delayed up to a year driving up costs of financing and construction and possibly jeopardizing the project.

That night, opponents of the proposed bond sale turned out to ask for more time so that they might better understand the terms and scope of the project.

Those opposing the bond sale testified that they were unaware of the plans though more than 20 public meetings were held during a yearlong planning schedule for the clinic expansion.

Now, the borough is racing to get the state approval of the revised budget in time. The state gave CPH 60 days, from Nov. 9, to submit a revised budget.

Central Peninsula Hospital CEO Rick Davis sent the revised budget, after removing $4.6 million in projected costs, to the state for approval on Dec. 13.

Navarre said he is in direct communications with the commissioner of The Department of Health and Human Services and expects the revision to be approved by today and have no affect on the bond sale timeframe.

“Definitely before the end of the year,” he said.

Office of Rate Review Department of Health and Social Services Executive Director Jared C. Kosin said the revised budget was received and is under review as of Thursday. Kosin could not say when his recommendation to the commissioner would be made.

The ordinance approving the bond sale and giving the mayor authority to sell bonds requires the Certificate of Need from the state arrive before the bonds can be sold.

The Department of Health and Human Services Division Commissioner William Streur followed the recommendations of the review department and did not approve CPH plans to build two additional endoscopy clinics or plans to expand the hospital’s imaging capacity with MRI, PET and CT scans.

Kosin said the state denied the addition of two endoscopy suites because Davis’ application included anesthesia machines in the suites — equipment that the state determined is not needed to perform the procedures with an endoscope.

Public comment given to the state warned that approving the expansion of two endoscopy or procedure suites containing anesthesia machines will result in the later conversion of the spaces into ambulatory surgery suites without a need for further approval — essentially creating two full-blown surgery clinics under the radar.

“The next step is a basic conversion without need to go through a Certificate of Need again,” Kosin said.

Creating additional surgery suites was in no way part of the plan, Davis said. The suites are big enough to be operating rooms and maybe would have been converted one day. It’s “due diligence” to plan space for multiple use like that, he said.

Davis said he based the “need” for two additional suites on a current “bottle neck in pre-op.” The hospital has three surgeons doing endoscopies and they will not perform them without anesthesia, he said.

The state did not take exception with what the new MRI could do for image quality or patient experience, but said that Davis’ application failed to show a documented need for the service as required by General Review Standard 1, the state law governing Certificate of Need reviews. It relied on a belief in quality service, according to the review.

“The application does not directly address the concept of need in this context,” Kosin’s team wrote. “CPH essentially attempts to establish need for the proposed MRI using uncertain predictions.”

The state denied the addition of the PET/CT scanning as well. Davis failed to show a need for the expanded services, according to the review.

The Department of Health and Human Services Division of Health Care Services did issue a conditional Certificate of Need for the remaining project plans, which include and 5,100 square-foot infusion therapy clinic, pain management clinic, orthopedic clinic, a 10,000 square-foot spine clinic and additional undetermined clinic space.

If the state approves the revised budget, the condition will be dropped of off the Certificate of Need allowing the bond sale.

With the need for thousands of square feet of space removed by the state’s action there is no need to change the size of the building as long as costs remains within 15 percent of the original and the scope of services do not change, Davis said. The now unassigned space for the unapproved programs will now go to additional clinic space and set aside for future use, he said.

Navarre said he explained to the commissioner that the borough was looking to build an expansion that would serve the needs of the hospital for the next 40 years.

Newly elected District 3 Assembly member Wayne Ogle said he was disappointed that the borough’s application for bond sales might be in jeopardy by the current timeline.

Ogle and District 1 Assembly member Kelly Wolf voted against the bond sales during the Oct. 22 meeting because they supported an additional two-week delay so that the public could learn more about the plans.

Thursday Wolf said he was not informed that the state had denied a Certificate of Need on portions of the project. Wolf said he was concerned that the assembly was not told about the issue, though the borough knew since early November that the project had to change scope. He said the lack of notice “did not speak well” and called it a “misstep” on the part of hospital leadership and the borough’s administration.

“(The assembly) approve the sale of the revenue bonds,” Wolf said.

Prior to the vote, Davis testified that the expansion, known as Phase V in the hospital’s decade-old strategic plan, has been in the works for years as he presented a list of 22 public meetings held during 2013 in which plans were presented or discussed, including assembly meetings, local associations and chambers and newspaper advertisements.

During that meeting, Navarre pointed out the resolution had been already delayed by two weeks. He warned that an additional delay of two weeks could result in the bond sale and construction being pushed back one year and increase costs or jeopardize the project.

Reach Greg Skinner at

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RaySouthwell 12/20/13 - 07:04 pm
Bond Bank

“Municipal Bond Bank of Alaska.” Not really a Bank of Alaska. But “Alaska Municipal Bond Bank.” The concept was great in the old days when Alaska lacked its own capital to establish our own true, public Bank of Alaska.

The Bond Bank is a “public corporation” that creates bonds and sells them to investors. Because of the strength of the collective State they get a better rate and pass the savings on to municipalities. It was great because of the saved interest payments municipalities pay.

Consider the improved savings if we established our own Bank of Alaska. Take our rainy day fund and place it in a public Bank and create credit/money. Use this new money to purchase bonds from Alaska’s municipalities for infrastructure projects. And who are the investors purchasing these bonds. The Bank of Alaska. Who gets the interest collected, The great State of Alaska.

The current system’s interest payments leave the State.

If we create bonds to sell to investors why not become our own investor. Bond Bank creates bonds and a Bank of Alaska would create money through credit to purchase bonds.

Here is the link to “Alaska Municipal Bond Bank”-

More on the structure-

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