Assembly members commiserated with city and hospital staff on Monday to discuss how to move forward on new organizational arrangement at Wrangell Medical Center.
Currently the hospital is a public asset, managed by the City and Borough of Wrangell. For several years it has been contending with inconsistent revenues and cash reserve concerns, and in the event of a default the city would be liable for any outstanding debts. In 2015 the Assembly approved a reserve source of interest-free funds of up to $500,000 for WMC to draw from in case of emergency.
At the meeting of WMC’s governing board on February 21, hospital finance director Doran Hammett explained there was only enough cash in reserve to cover 25 days’ operating expenses. The hospital had previously drawn $250,000 from the city’s line of credit, which made up about nine of those days. While expecting a Medicare settlement of about $390,000 to come in by the week’s end, Hammett pointed out the hospital’s revenues were overall on a downward streak.
“January was not a great month,” he had told board members.
A drop in admissions from the previous year led to revenues being 17 percent lower than budgeted for, and in the fiscal year since July 1 revenues have lagged behind expectations by 10 percent. Net losses for FY18 are so far more than double what had already been expected, at $406,577 by the end of January.
“You don’t need me to tell you that’s not sustainable for the long run,” Hammett concluded.
Discussions about a possible changing up of the Wrangell hospital’s management – be it finding a managing partner or spinning it off entirely to private enterprise – have been taking place between the WMC board and Assembly since at least November. Last month Assembly members approved entering into a consultancy contract with Dorsey & Whitney, which will provide legal assistance and advice on a possible transition.
A likely trajectory they will explore is some degree of partnership with Southeast Alaska Rural Health Consortium (SEARHC), a regional healthcare provider which last year acquired Alaska Island Community Services, another provider headquartered in Wrangell. Since that deal SEARHC has reaffirmed AICS’ prior commitments with WMC and the city.
AICS and WMC had historically maintained a close working relationship over the years, with the clinic purchasing about a third of the hospital’s total services and providing its physicians. Plans to eventually replace the hospital’s current facility would have the new structure built on a campus neighboring AICS’ main clinic on Wood Street.
Hopes for the arrangement continue even after AICS’ acquisition, and SEARHC had last month offered to assist the borough with costs for architectural work on a combined campus. Costs on a draft concept for the new facility were presented last November, with costs coming back considerably higher than the hospital had hoped for. With interest and updated equipment, the price tag could run between $90 million and $115 million over a 30-year span, depending on the design option.
Given the limited resources on the part of the borough and its hospital, last month members of the WMC board and Assembly concluded a partner such as SEARHC would be needed to make any such investment feasible.
Since receiving the WMC board’s input, city staff have since worked out a non-binding agreement with SEARHC to hire a consultancy with the intention of laying out potential management models best suited to that arrangement.
Meeting Monday at City Hall, Assembly and WMC board members, city staff, and representation from SEARHC and AICS met for a joint work session. City manager Lisa Von Bargen explained they were there to converse about expectations for the process ahead, as well as how best to move forward toward reaching those goals.
A non-binding letter of intent to formally explore management options with SEARHC for Wrangell’s hospital is being drawn up at the moment. City staff anticipates the letter will move forward as an actionable item at the March 13 assembly meeting.
During discussions Assembly member Stephen Prysunka laid out a couple of “deal-breakers” for him in reorganizing the hospital. For him, maintaining WMC’s critical-access status and long-term care facilities were the most important.
“If there’s not a blue H somewhere, then we’ve lost out,” he said.
Fellow member Patty Gilbert emphasized for herself the importance of maintaining the current level of care while keeping costs stable. However, she also had hoped for a wider courting of potential partners beyond SEARHC. At previous meetings last fall it had been noted the close ties and efficiencies currently enjoyed with AICS could be risked if the hospital’s management were split with another competing party.
“I think we really short changed ourselves,” she said.
Assembly member David Powell disagreed, noting that other healthcare providers had so far not rushed in to express interest. In the meantime, the delicacy of the hospital’s finances coupled with the city’s liability toward it suggested time was essential.
“The longer we wait, the more money it costs the city,” he commented. Powell also pointed out the importance of the hospital to Wrangell’s economy. “If we lose the hospital, then we’re done.”
As well as putting together a letter of intent, another purpose of Monday’s work session was to establish a steering committee to help manage the process. As currently proposed, a committee would include two members of the Assembly, two WMC board members, Von Bargen, WMC CEO Robert Rang, SEARHC representatives and an architect.
On the WMC board, Don McConachie suggested they call an emergency meeting to appoint committee members ahead of the March 13 meeting date. As he saw it, the sooner a committee was formed the better.
“I think this is something we should do so we have our ducks in a row,” he said.
A steering committee would need to formally approved by the Assembly on March 13. After that, a feasibility study would be undertaken to determine whether a joint-campus approach for a new hospital would be workable. A larger stakeholder group of the hospital steering committee, AICS and WMC leadership, and at-large members of the community would be involved in the ensuing process. From there, a community vote on the hospital’s future could eventually be an option before any formal transition.
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