Assembly closer to Heritage deal

Negotiations continue in effort to have hospital run nursing facility

Posted: Tuesday, April 25, 2006

The Kenai Peninsula Borough Assembly has authorized Mayor John Williams to enter a conditional agreement to purchase a financially struggling Soldotna skilled nursing facility.

The assembly voted unanimously April 18 to allow Williams to sign an agreement between Banner Health Inc. and the borough, a preliminary step to buying Heritage Place.

If bought, Heritage Place, on Rockwell Avenue in Soldotna, will be operated by Central Peninsula General Hospital.

At the same meeting, the assembly also introduced an ordinance that sets up the funding for the future purchase, setting a total price of $999,999. That ordinance gets a public hearing May 16.

The vote doesn’t obligate the borough to buy the 60-bed facility, but allows for further negotiations between seller and buyer to settle remaining issues before consummating the sale.

Banner Health has been losing money operating the facility for several years, and is willing to sell for just under $1 million, though the nursing home and business have an estimated worth of around $3 million. The less-than-$1million purchase price would avoid the voter-approved cap on spending that requires a ballot measure when spending exceeds $1 million.

According to data provided by the borough, a comparison of revenue and expenses under Banner Health and under borough ownership shows how operation by CPGH would avoid the losses suffered by Banner Health.

As an independent operator, Banner Health gets one level of reimbursement through Medicaid, an estimated $239 per day per patient. CPGH, operating the facility as what is called a “co-located” facility with the hospital, would get a higher rate of reimbursement, an estimated $322 per day per patient.

That reimbursement rate, however, would not be available until fiscal year 2008. The hospital is expected to be eligible for two years of state funding at $1.45 million per year through the Disproportionate Share Program that would help the hospital through the transition period.

Banner lost money, in part, because the costs of wages and benefits grew faster than the reimbursement rate from the state Medicaid program. So did insurance and other overhead expenses. Also, the four-year contract under which Heritage Place is operating, now in its third year, limited the growth of the reimbursement rate.

According to Banner data, the corporation lost $106,000 in 2003. Annual losses continued to grow, reaching $286,000 in 2006.

According to the borough, purchase would ensure long-term care continues in the community, retain more than 95 Heritage Place employees, acquire a facility for a third of its value and not require an increase in taxes.

The measures are Resolution 2006-039 and Ordinance 2006-20.

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