Assembly move shows governance flaws

Posted: Sunday, July 11, 2010

As the Central Peninsula Hospital governance structure issue progresses, some residents have been questioning why the discussion is even happening.

The sentiment says: Isn't the hospital a great local facility operating as smoothly as ever? Why would we change anything now?

Hospital leaders are looking no further than Tuesday night's assembly meeting to show why big changes may be needed.

At the meeting, the Kenai Peninsula Borough Assembly delayed action on signing a sole source contract that would have allowed construction to begin at publicly owned South Peninsula Hospital's proposed Magnetic Resonance Imaging facility. Not wanting to be reckless with public money, the majority of the assembly decided it was better to take another month to think about the million-dollar decision.

South Peninsula Hospital CEO Robert Letson says the health care facility needs a new MRI "as soon as we can reasonably get one."

If South Peninsula were private, it might be farther along with the MRI project, Letson said.

"At times, the procedures may slow us down a little," Letson said. But South Peninsula is not currently considering changing its public governance structure.

"There might be less procedures to go through, but we'd lose the benefit of having the support of the borough," Letson said. "We're grateful for the borough's support."

Unlike South Peninsula Hospital, Central Peninsula Hospital is considering severing its partnership with the borough. Ryan Smith, CPH's CEO, said the MRI is the perfect example of why such considerations are taking place.

"It's a very cumbersome structure to work within. We're not agile organizations," Smith said. "When information is out in the public like that it really slows down the process, which would be problematic in a competitive environment."

Smith said CPH has its own recent example of action being delayed by the public process.

In February, CPH started looking into buying additional property for additional medical office space, according to Smith.

Smith said if CPH were private, the purchase would already be a done deal.

"Usually (in private hospitals) there's only one decision maker and that makes it a lot easier," Smith said.

Instead, the assembly will discuss the hospital's potential land purchase at an Aug. 3 public hearing and again at a Sept. 7 public hearing.

This is the kind of deliberate process that James Orlikoff, a Chicago-based health care governance consultant, advised against during a public talk in March.

"When you have to be efficient and effective and make decisions that many people in the community won't like, that some of the officials won't like, that require alacrity in decision making, the model that you have does not facilitate that and it in fact inhibits," Orlikoff said at CPH in March.

The hospital's governing body, Central Peninsula General Hospital, Inc., paid Orlikoff, president of Chicago-based Orlikoff & Associates, Inc., $15,000 for his work and $1,800 for his travel, according to documents obtained in a records request.

Smith said CPGH, Inc., hired Orlikoff because he is one of a few national experts specializing in hospital governance consulting.

Assemblyman Gary Superman, Nikiski, recognized that by delaying action on the South Peninsula Hospital MRI facility, the assembly might give Smith and Orlikoff's views some weight.

"I do not want to lend any fuel to the argument that what we have right now is just too cumbersome an environment for them to operate in," Superman said, while lobbying for the assembly to agree on Tuesday night to move forward with a sole source contract for the MRI facility.

The assembly postponed the issue until Aug. 3.

In the meantime, the assembly has ramped up its involvement in CPH's government structure decisions. Three assembly members -- Superman, Charlie Pierce, of Sterling, and Paul Fischer, of Kasilof -- have been allowed to sit in on non-public executive sessions that discuss the issue.

The assembly will have the final say on what happens with the hospital. The assembly could also send the issue to the voters via a ballot initiative, something Borough Mayor Dave Carey has suggested.

In an executive session held Thursday afternoon, the hospital's governing board, members of the borough administration and assembly and others learned more about potential suitors who have submitted proposals to partner with CPH.

Smith said the hospital has received eight proposals, six from for-profit organizations and two from nonprofit organizations.

CPGH, Inc., is paying an investment banking firm, Juniper Advisory, LLC, $25,000 per month to assist in a potential partnership deal. Details of the proposals will not be made public until CPGH, Inc., is ready to come to the assembly with a recommendation. That's slated to happen on Sept. 7.

Assembly members permitted to attend Thursday's executive session as well as future meetings said they are looking forward to learning more about the issue. Because of a confidentiality agreement, assembly members are not allowed to discuss details until CPGH, Inc., submits its recommendation.

"It's the biggest decision since I've been on the assembly," Fischer, an assembly veteran whose term expires this fall, said.

"Ultimately, the borough assembly is going to make this decision, so it certainly raises my confidence level in that we're sitting there getting the information and not getting bits and pieces of information," Pierce said. "Having these details is an intricate part in formalizing an opinion."

Currently, the borough owns CPH. The borough leases the facility to the nonprofit corporation CPGH, Inc. An 11-member board governs the hospital, but the borough assembly must first approve major capital decisions.

Possible governance structure options range from making no changes to the current arrangement to selling the hospital outright.

Andrew Waite can be reached at

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