Board powers curbed

South Peninsula Hospital Service Area gets no voice in contract

Posted: Thursday, August 09, 2007

The South Peninsula Hospital Service Area Board likely will get to send a nonvoting observer to the negotiating sessions, but beyond offering advice to Mayor John Williams, the board will not have a seat at the table when the borough administration begins hashing out a new contract later this summer with the entity that actually runs the facility, South Peninsula Hospital Inc.

By a 7-2 vote late Tuesday night, the Kenai Peninsula Borough Assembly enacted a controversial measure, Ordinance 2007-28, taking back certain powers delegated to the service area board (SAB) years ago by assembly action, defining the board's role as that of adviser to the borough mayor regarding operations and management of the service area, with a duty to "review and recommend" annual service area budgets.

Gone from the borough code is language that detailed the board's power to provide various services and "for the administration and operations of the service area." Also culled were specific references to levels of service and responsibility to the electorate for the amount of taxes necessary to provide services. The board, however, may continue performing some of those duties under a more nebulous clause adopted Tuesday permitting it to "perform such additional functions as the assembly may authorize."

Gone, too, is any implied SAB authority to negotiate contracts with the operating board.

South Peninsula Hospital Inc.'s board of directors, also called the "operating board," and the elected SAB members have typically been the ones to negotiate operating contracts. However, a combination of financial factors and recent revelations raising concerns about hospital management in connection to the ongoing construction project led Williams to insist he and his administration, rather than the SAB, serve as the borough's negotiating team when ironing out the next sublease and operating agreement with SPHI.

That hardly sat well with the many vocal residents of the service area who spoke out against the ordinance Tuesday and who universally decried what they said looked like a power grab by the administration if not an outright threat to voter rights.

Many called on the assembly to reject the ordinance, or at least postpone final action until another hearing could be held Sept. 18 when the assembly is to meet in Homer.

However, the assembly voted 5-4 against delay, and later voted 7-2 to enact the ordinance. Only assemblywomen Milli Martin, of Diamond Ridge, and Deb Germano, of Homer, voted against the measure.

Martin said the assembly and administration were "visiting a travesty on my community."

Ordinance supporters, however, argued there appeared to be good reason for the administration to start taking an active role in contract negotiations despite a history in which previous administrations had adopted a more "hands-off" approach.

New revelations

Perhaps most significant for assembly members voting to put control over upcoming contract negotiations in the hands of the administration was the revelation this week that Phase 1 of the construction project, now about 98 percent complete, had been built without a critical document in place called a certificate of need (CON).

State statutes require CONs before funds in excess of $1.15 million can be spent on certain publicly funded medical facility projects. More than $16 million in bonds and operating funds have been spent on Phase 1, in possible violation of those statutes.

On Tuesday, Williams said it was the borough administration's position that the duty to assure certificate-of-need procedures were being followed lies with the hospital administrator and operating board.

At their core, CONs help ensure that where limited funding is available for hospital facilities and services, needs are well-defined and new services do not duplicate existing services such that all become financially unfeasible.

In addition, application for the CON for Phase 2 was not filed in a timely manner and has not yet been granted. As a result, the borough administration, initially prepared to accept construction bids for the $14.7 million Phase 2 project Aug. 15, announced Tuesday it had to push back the bid date to Oct. 17.

Testifying before the assembly, hospital CEO Charlie Franz opposed the ordinance, but when confronted by pointed questions from the assembly about the lack of certificates of need, Franz took full responsibility.

"Our certificate of need application was delayed substantially in being submitted to the state," he said. "I could sit here and give you a list of excuses about why that is, but I'm not going to do that. It wasn't submitted because I didn't get it submitted on time. That's my responsibility and my fault."

He said the application had been submitted and is scheduled for a public hearing in Homer on Aug. 16, adding he expects it to be approved.

As for Phase 1, it had a certificate in 1999, but Franz said he had "dropped the ball" during the renewal process and, facing other hospital issues, failed to see it through.

State to review project

The borough, the Alaska Department of Health and Social Services and the Alaska Department of Law are now attempting to sort out the ramifications of the lack of CONs. Williams said the three government entities are working together to resolve the legal issues, but that there is no "witch hunt" under way by the state. Rather, he said, it is an attempt to get the project back on track in everyone's interest.

How long that might take is unclear. In an interview Wednesday, Williams said the administration is "still committed to building the hospital (expansion) and bringing about a program befitting of the community." He said there is "no intention" on the part of the administration to hinder the project, but the new time line likely would require work to begin in the spring, rather than this fall.

In all, about $31 million in taxpayer money will be spent expanding the hospital. Given the huge sums involved and the problems now facing the hospital administration, Williams said it is in the best interest of the public that contract negotiations and other controls be clearly located where the responsibility lies with the administration and ultimately, the assembly, which holds the purse strings.

"It was time to clean the slate, go to bedrock and build a foundation for a new understanding," he said.

Ordinance 2007-28 actually changes little, except for the contract negotiations responsibility, Williams said. The SAB's advisory role has not diminished, he added.

The emotional response to the administration's move was entirely understandable, he added, but based largely on a misunderstanding of the SAB's actual role, as well as a perception errant, Williams said that the SAB had more power than state law and court precedents actually extend to service areas.

Williams promised that once the project is safely back on track, he would "reach out" to the community, the hospital and the SAB and begin a healing process that would include further discussion of the board's powers.

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