Following talks earlier this month with the city, the hospital board drafted a letter requesting that it move forward with finding a third party partnership.
At their November 15 meeting, Wrangell Medical Center governing board members discussed the pros and potential cons of partnering up with another organization. A major reason for considering the move is seeking out project support for construction of a new medical facility, an elusive goal for much of the past decade.
Among the board’s more immediate concerns is maintaining cash flow to the hospital. During its mid-month meeting in October the board was informed WMC coffers had been at breaking point, having less than a week’s cash on hand available for day-to-day expenditures. It costs roughly $28,000 a day to keep the facility running, and an emergency loan from the city in the amount of $250,000 was approved to help stabilize its finances.
During his monthly report last week, WMC chief financial officer Doran Hammett explained the hospital had $629,000 cash-on-hand, or about 22 days’ worth. Around half of that was the loan amount from the city, meaning actual operating cash levels were closer to 13 days’ equivalence.
“Which is a bit higher than the end of last month, about 11 days,” he added.
Problems with billing were partly to blame for the reduction in cash flow since the summer, but a greater problem to WMC’s compensation model is the age of its building and equipment. Because it is a critical access hospital, a special designation recognized by the Centers for Medicare and Medicaid Services, it receives special remuneration from those federal services for the depreciation in value in its assets. The building itself has not offered any depreciation to draw from for some time, Rang explained, and what depreciation the hospital has been drawing has been derived from its few pieces of newer equipment.
One of the arguments put forward in favor of a new hospital building is its value, and its contribution to revenue as a result of depreciation.
But patient revenue itself has been down this year, with the net value eight percent lower than was seen at this time last year. Cost savings have helped offset this somewhat, also about five percent below budget. Savings with staff costs have also been seen through rescheduling and the use of agency hires, whose benefits are not covered by the hospital.
Hammett reported the hospital is expecting an influx of money at year’s end, with $278,594 due back from Medicare as estimated in the cost report portion of its annual audit.
While the hospital’s financial stead for operations seems to have stabilized somewhat, it would likely be unable to cover the costs of building a new facility, according to a feasibility study put out earlier this month. Consultants had assessed draft plans and estimated a new, fully equipped facility would range between $41 million to $52 million to construct, depending on how it would be constructed. Over a stretch of 30 years, with interest the final price tag would be more than double that. At a workshop with city staff and the Borough Assembly on November 6, it became apparent a great deal of help would be needed to finance the project.
“The city was not real comfortable taking on that amount of debt,” said Rang.
Talk at the meeting led to the suggestion of bringing in a third party, either to assume operations at the municipally-owned hospital or to share in costs and administration. One early candidate suggested for such an arrangement was Southeast Alaska Rural Health Consortium, which earlier this spring acquired Wrangell-based clinical provider Alaska Island Community Services. Present at the workshop, SEARHC chief operating officer Dan Neumeister indicated to the Assembly his organization could be interested in a partnership.
Though the city owns the hospital, as its independent governing body, the WMC board was tasked with coming up with a direction it would like to take in what such a partnership would entail.
“What we have here is an open topic for discussion,” said Patrick Mayer, recently elected the board’s president.
Members discussed a draft letter addressed to Mayor David Jack and the Assembly, which would recommend the hiring of a consultant to draft a recommendation based on the hospital’s operational needs and finances.
“The relationship should include retention of a level of oversight by the Borough Assembly,” it offered, “such that the relationship may be altered if it becomes apparent that the community is not receiving the appropriate level of healthcare services.”
“I think the council is really apt to looking at a third party that would be joining in with us,” was the impression of Don McConachie, a board member who sat in on the workshop discussions.
The board would have some options moving forward, either negotiating with a single provider like SEARHC or else shopping around with a request for proposal to other healthcare providers.
“We have a relationship right now with SEARHC,” McConachie noted. From his outsider’s perspective, he said its merger with AICS appeared to have gone smoothly for both parties. “If that was the case, it should be something we should possibly pursue.”
Fellow board member Olinda White wanted to know more about how an agreement between SEARHC and the hospital would look, particularly in ensuring that WMC remains a community facility.
“I would just hate to see certain things stop,” she said, such as chemotherapy. On the other hand, she acquiesced that with its greater organizational size, SEARHC could also bring new services to the community.
“They have a substantial footprint in Southeast Alaska,” said Mayer. Beyond its reach, he felt SEARHC was “well-positioned financially” to assist the hospital’s goal of constructing a new facility.
Rang said some of these questions would be answered in the next phase, or the hiring on of a consultant. After discussing potential costs and suggesting some changes to the letter’s phrasing, members voted unanimously in favor of the document. It will next be considered by the Assembly at its meeting next month.
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