An informal workshop was arranged last week to allow members of the City and Borough Assembly meet with representatives of two medical providers planning to merge next month.
In October, Wrangell-based clinical services provider Alaska Island Community Services (AICS) announced it would merge with the larger Southeast Alaska Rural Health Consortium (SEARHC), based in Sitka.
For a symbolic price of $1, the property for AICS’ Wood Street clinic location was provided by the city in 2010 prior to the facility’s construction, with the intention of eventually building a new building for Wrangell Medical Center on the adjacent property. The statutory warranty deed involved in the exchange has a reversionary clause, which would revert the property back to the city in the event it changed hands or primary use.
Critical to completion of the merger is determining whether the deed’s clause would come into effect by the change in administration. On January 5, AICS director Mark Walker and SEARHC senior vice president Dan Neumeister met with Mayor David Jack, city staff and several Assembly members at City Hall to discuss the future. The transition is planned to finalize before February 1, so both clinical services would need to have the deed’s terms clarified before then.
“We do feel like we’re in a bit of a time crunch,” explained Walker. With the merger, he pointed out his employees will be able to extend their medical coverage to their immediate families, which would have to wait another month in the event of delays. They were looking at a three-percent pay increase as well he pointed out.
City manager Jeff Jabusch explained he had consulted with Wrangell’s attorney about the deed. Before he could offer an opinion, the attorney wanted to see the merger’s incorporation paperwork in order to determine the deed structure. SEARHC and AICS were unwilling to hand over the documents, citing confidentiality.
“We’re private, nonprofit entities,” Neumeister explained. “There are a lot of exhibits in there. We don’t want to show what people are making.”
The SEARHC attorney was willing to speak with his Wrangell counterpart over the phone, but to do that Jabusch explained the city attorney would need to know “the wishes of the Assembly” first before engaging in talks on its behalf.
Several Assembly members expressed some unease with the merger. Becky Rooney was concerned about having a larger organization “with outside interests” coming in, while Patty Gilbert wanted to see some explicit boundaries added into the deed demarcating what services AICS/SEARHC would be able to provide, so as not to compete with WMC. AICS and WMC have a memorandum of understanding outlining their cooperative relationship, but much of the agreement is informal.
“It bothers me that there’s nothing in writing, nothing enforceable,” Gilbert said. “We feel very protective of our asset, the hospital.”
“I would in this clause somewhere like a legal leg to stand on,” Rooney agreed.
Fellow member Julie Decker disagreed, noting part of AICS success in the past has been due to its flexibility to adapt. Starting with counseling services when it first began, over the years the organization has taken on additional roles in the community and wider region, moving into clinical care services in 2004.
“This prescriptive, I think, would be too much,” Decker commented.
“I have no problem with this, quite frankly, as long as everything stays the same,” Jack said of the deed wording.
Presiding the meeting, he had several questions of continuity for Neumeister and Walker.
“One concern – this is personal, that I have – is a tax issue,” Jack began.
At the moment, for its office and clinical space AICS provides between $60,000 and $70,000 each year in property taxes and other payments. Speaking with the state assessor, Jabusch reported SEARHC’s clinic in Haines was tax-exempt, and that as a “quasi-government organization” its other office space could be exempt from those payments. On the other hand, he noted whether the organization would pay property taxes was legally out of the city’s hands, being a state managed matter.
“We’ve already gone on the record to say we wouldn’t do that,” Neumeister commented, of SEARHC seeking an exemption. Its president-CEO, Charles Clement, came to Wrangell in November and made that assertion to the Assembly and wider public. He had pointed out SEARHC is a licensed 501(c)3 nonprofit like AICS, and that its tribal exemption would not apply in the case of Wrangell’s clinic.
Jack continued with his concerns: “(Question) two is what will happen in a couple of years. Will it become a Native preference?”
“I appreciate the question about Native preference,” Neumeister responded. “We have a real history of total access, regardless of race, color, or creed.”
He noted as one example their facility in Metlakatla, which served community members in Craig regardless of their affiliation. Walker added that SEARHC would assume AICS’s grant commitments in the merger, several of which require equal admittance.
Jack’s final question was whether the transition would result in any conflicts with the current relationship between AICS and WMC. “I want to see that continue,” he said.
Neumeister explained that relationship would in some ways be improved. Its current sharing of services and personnel would continue as is. On the revenue side, as a federal-level entity, SEARHC expects to remain largely unaffected by potential cutbacks to Medicaid coverage in the event of an ACA rollback. The organization also has better access to bringing in medical specialists, who would likely use WMC’s on-hand laboratory and facilities as needed.
Walker and Neumeister both pointed out the WMC governing board and local Chamber of Commerce had recently issued letters of support for the prospective merger. Speaking with hospital CEO Robert Rang afterward, he confirmed that he had confidence in the transition, adding that the permanent addition of his position to the AICS advisory board post-merger was assuring.
“That helps with that transparency that they’re assuring us with,” Rang said.
After the merger, the AICS managing corporation would disappear, though its name would be retained.
“It is a true merger, and the corporate board would cease to exist,” Neumeister explained. “In place of that we have an advisory council that we will set up.”
Walker would also be retained on the council, which will aim to amplify local input and forward concerns for continuing care, advising SEARHC administrators. During discussions, Neumeister also offered the addition of a seat reserved permanently for an Assembly member to keep them informed and involved.
Even with these assurances, Gilbert pressed for inclusion of more rigorous assurances to be written into the deed. Neumeister felt a revised MOU with the hospital would be a more appropriate place for that than the deed document, a feeling echoed both by Jack and the city’s attorney.
“Health care is changing,” Neumeister commented. “We’re trying to create a level of fluidity here.” In addition to having the two attorneys discuss the merger details and some revisions to deed wording, he said SEARHC would get together with the hospital to update their MOU.
“What may sound like a good handcuff today might not be a good handcuff five or six years from now,” he added.
“You can always loosen a handcuff, but you can’t always slap one on after the fact,” Gilbert replied.
The Assembly will expedite its update of the deed documentation, holding a special meeting ahead of its January 24 session if necessary to get the item back to both parties ahead of their planned merger.
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