SPH expansion denied by state

Recently completed space OK'd; further construction work nixed

Posted: Thursday, November 29, 2007

The commissioner of the Department of Health and Social Services has turned down South Peninsula Hospital's application for a state Certificate of Need document necessary to launch Phase 2 of its $32.6 million expansion project.

In a letter Tuesday to Administrator Charlie Franz, Commissioner Karleen Jackson authorized Phase 1 of the project, a $17.3 million project now essentially complete, but denied approval for Phase 2 elements, including the proposed three-floor south wing that would have supported a new helicopter landing pad.

Also not approved were relocation of the respiratory therapy facilities, a surgery pre- and post-op space, one emergency department exam room, and a request for $1.9 million in authorized spending that lacked a defined purpose, project or plan.

Kenai Peninsula Borough Mayor John Williams and administration staff and hospital officials, including acting director Christine Anderson, met Wednesday to coordinate a response. Franz was out of town. The hospital and borough have until Dec. 27 to file a request for an appeal hearing.

"We are preparing an appeal," Williams said late Wednesday afternoon, adding that he believed there was room to negotiate and that he was looking forward to meeting with the commissioner to iron out a solution. That a Certificate of Need was issued for completed sections of the expansion gives him hope that a CON for the next phase can eventually be secured.

"They may be viewing the addition yet to be built as requiring an entirely new CON," Williams said. "If we must start from square one on the new facility, we may be about where we would expect to be" in that process. He also said he it was obvious the commissioner is seeking a reply from the borough and hospital, so at this point he is considering her decision as something less than an outright absolute denial of the next phase.

Concerned about the rising cost of building materials, Williams also said he had gotten word from his finance director the project was "still in good shape" financially, despite the likely delay.

A 19-page analysis obtained from the state health and social services department outlined the state's reasoning behind approval of some parts and disapproval of other parts of the total project. Essentially, the state said the Certificate of Need application filed in July of this year had justified components completed since work began in June of 2006.

That included a new emergency department that has yet to be occupied. One of its five new exam rooms, however, was denied approval. What exactly that will mean in practical terms is not clear since it already exists.

"That's an interpretation that needs to be cleared up," Williams said, adding a solution may be as simple as renaming the room.

Also approved was relocating diagnostic imaging services (an MRI machine), as well as new or reconditioned spaces for admitting, registration, waiting, drop-off, parking, a laboratory, central sterile processing, pharmacy, dietary, housekeeping, laundry, materials management, medical records/health information management, purchase of minor equipment and furnishings, and utility upgrades including new boilers and an oxygen generator.

Planned upgrades to and relocations of many of those functions were dependent, however, on construction of a new wing, according to Franz. In an Oct. 29 letter to Commissioner Jackson, he insisted that the expansion was designed and should be viewed as a single project one split into two phases for financial reasons after it became clear costs would exceed available funding.

"It is absolutely critical to emphasize that the new southeast wing is the key component of being able to meet the hospital's space needs and cannot be separated from the proposed project without a complete redesign," Franz wrote, adding that a redesign could not be accomplished in less than six months.

Among other things, the new wing would have replaced 22 patient beds in double-bed rooms with 18 single-occupancy rooms, giving the facility more flexibility and patients improved quality of care.

During reconstruction of parking areas and access roads, the hospital's helipad was eliminated. It was to be replaced by a new pad atop the proposed new wing. In its absence, patients have had to be transported to and from Homer Airport when arriving by helicopter or being moved to medical facilities in Anchorage. That is likely to continue for some time, and where a new helipad would go now is not clear. The hospital property is landlocked and there is no land available.

"Without the new wing, there is no place for the helipad," Franz said.

Williams noted that helipads atop hospitals were standard throughout the nation.

A new wing also would have allowed redesign and use of current acute care patient rooms, a nursing station and an intensive care unit for surgery pre-op and post-op space, Franz said. In addition, he said there would be "significant functional problems" for the pharmacy, laboratory and information systems if the new wing were not constructed, as well as for respiratory services.

Earlier this year, it came to light that a valid Certificate on Need (CON) did not exist in support of the expansion's first phase, by that time almost complete. Franz has accepted responsibility for failing to follow through on a renewal of an earlier CON issued around 1998, when the cost of the project was estimated at considerably less than the current $32.6 million.

South Peninsula Hospital began construction in June 2006, 13 months before filing a new CON application in July of this year. Some $16 million was spent without the umbrella of a valid CON.

The July CON application lumped the two phases together, requesting approval for spending a total of $32.6 million, including the $16 million already spent.

Analysts with the department's Health Planning & Systems Development Unit targeted what they called "overt violations" of the state's Certificate of Need statutes and regulations. They recommended disallowing all or some portion of the capital costs expended without an approved CON, or barring the hospital from including those portions of the facility as part of any calculation of need or capacity for current or future CON applications.

The commissioner made no mention of the suggested penalties in her Nov. 27 letter to Franz, nor were they part of the CON covering the new construction already in place.

Hal Spence can be reached at hspence@ptialaska.net.

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