Hospital issues deserve a healthy debate

Posted: Friday, June 25, 2010

Central Peninsula Hospital is, by many accounts, a crown jewel of an asset to the Kenai Peninsula Borough.

What began as a small operation with three doctors nearly four decades ago has grown into a multi-million dollar health care campus, the largest non-government employer on the Peninsula and the eighth largest non-profit employer in Alaska. Revenues have grown steadily every year, currently nearing $140 million.

And in terms of public support, residents have paid an ever shrinking portion of property taxes to the facility, from about $3.6 million in 2007-08 to $2.1 million this fiscal year. Eventually, that contribution will drop to zero.

Now, we're in the midst of a discussion over whether to change its management or continue to hold on to such an asset.

We believe that's a healthy discussion to have.

In just a few weeks a consulting firm that's assisting the hospital in this decision will bring forward bid offers solicited from health care organizations across the country. That's part of the process of determining the hospital's value and in determining the best way to go forward. Possibilities range from no change at all to an outright sale, with various management structure permutations in between.

The final decision would be up to the borough assembly. Or, the assembly could turn it over to the voters.

Right now, the borough owns the hospital. A non-profit corporation, Central Peninsula General Hospital Inc., contracts to lease and operate the facility by way of an 11-member board. That board hires the hospital CEO, currently Ryan Smith. Another group of seven elected individuals, the Central Kenai Peninsula Hospital Service Area board, serves an advisory role to the non-profit and to the borough assembly.

So far that governance structure has allowed Central Peninsula to grow into the facility we see today. But there are reasons why that same governance structure could hinder growth going forward.

If trends in the Lower 48 show us anything, it's that community-owned hospitals are failing across the country, held hostage by ever-shrinking local government budgets and an over-taxed electorate. Any hope of future growth is going to require agility and quick decision-making, something that can't happen under an elected governmental structure.

There's also a question of future value. Once the hospital ceases taking any tax money at all, it then becomes simply a static asset. Government ownership will make little difference in hospital cost to the patient; those costs are influenced more by national insurance companies and employee insurance plans. The borough owns the facility, but doesn't get much in return just for holding the deed. On the other hand, if the borough sold the hospital, the new operator starts paying taxes to the borough.

And there's also the philosophical argument about the role of government itself. Should the borough or any government be providing services that compete with the private sector?

All these issues should be part of this discussion, not just whether it's "our hospital" or not. And now may be the best time to have that discussion. The borough has spent the last 40 years building an enviable asset. Now, at it nears the height of its value, is probably the best time to be thinking about its future.

In short: Let's give this idea about changing our hospital some serious, thorough consideration.

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