Borough, SPH sign new pact

Sublease, operating deal with South Peninsula Hospital Inc. OK'd

Posted: Monday, January 28, 2008

The Kenai Peninsula Borough Assembly signed off Tuesday on a new sublease and operating agreement with South Peninsula Hospital Inc.

The new six-year agreement negotiated last fall makes major changes over the previous agreement. The hospital's board of directors and the South Peninsula Hospital Service Area Board agreed to its provisions and recommended adoption.

The assembly unanimously enacted Ordinance 2007-41, putting the new agreement into effect.

Topping the list of significant revisions was a change to the entire format of the former agreement. The new pact more closely aligns with the lease and operating agreement the borough has with Central Peninsula General Hospital Inc.

Colette Thompson, borough attorney, said that was done largely for ease of administration, though there are differences between the two agreements.

The new agreement terminates Dec. 31, 2013 but includes authority to extend for another six years by mutual agreement. The previous agreement was for five years.

Another change from the earlier pact is that now SPHI is required to make oral presentations of its quarterly activity to the service area board and to the assembly, something CPGHI does regularly. Also, the new agreement sets out in writing what has been general practice: That SPHI follow certain purchasing policies and procedures and to obtain the borough's approval if it wishes to change those procedures, Thompson said.

The agreement includes provisions spelling out how and under what circumstances the hospital can expend money to analyze and plan for future capital improvements. The threshold levels at which various spending would need service area and borough approval, previously $20,000, were significantly increased to account for the recent expansion of the hospital's plant and inflation effects on the cost of equipment over the past decade.

The hospital now is required to establish a plant and equipment replacement and expansion fund within its budget similar to that of CPGHI.

A new paragraph spells out performance measurement requirements using standards established by national organizations.

Those standards are to be set out in the hospital's strategic plan. The hospital will have to show compliance with Medicare and Medicaid requirements and meet other measurable corporate goals.

Should performance in an area fall consistently below standards, the hospital would be required to develop an improvement plan within 60 days and have it approved by the borough.

The borough is entitled to terminate the contract if SPHI were to fail to meet parameters of a performance improvement plan, Thompson said.

New "level of service" standards require SPHI give the borough's contract administrator prior notice of any new or expanded services that may have an expected annual capital cost greater than $100,000.

A termination provision was revised to clarify grounds for ending the agreement.

Derotha Ferraro, public relations manager for the hospital, said hospital board members agreed the new pact was an improvement over the old contract. She said it had no holes or uncertainties, and its provisions were much better defined.

"All parties appreciate the clarity in it," she said.

Hal Spence can be reached at

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