Editor’s note: This is the second in a series of stories about the coming impacts of changing health care trends on the central Kenai Peninsula, and the work of the Kenai Peninsula Borough Health Care Task Force. Next week’s story will examine Alaska’s Certificate of Need program and the possible ramifications if it were to change.
By Jenny Neyman
If it ain’t broke, don’t fix it.
That was a sentiment often voiced in discussions over proposed changes to the governance and ownership structure of Central Peninsula Hospital.
The process began more than a year ago, originating with hospital administration and the board of directors of Central Peninsula General Hospital, Inc., the nonprofit organization that oversees the hospital. It continued to the Kenai Peninsula Borough Assembly, which created the Central Peninsula Health Care Task Force to further study the issue, and now has been handed back to the assembly.
Throughout that process there have been divergent opinions and ample debate over whether changes should be made, and if so, what, when and how. But among all the doom-and-gloom discussion of changing trends in health care, philosophical arguments over nonprofits versus for-profits, question marks still punctuating government-mandated health care reform and concern over the impacts these and other factors will have on Central Peninsula Hospital in the future, there is one big bright spot of near-universal agreement:
Central Peninsula Hospital is not broke. Far from it.
“We have a very functional, very good CPGH, Inc., Board and the administrators at the hospital do very well. The facility’s practically brand-new in its entirety. We have over 700 employees (including part-time). CPGH Inc. is the eighth-largest nonprofit, employeewise, in the state. Today we (the borough) put in absolutely nothing. Even the (Central Peninsula Hospital) Service Area is down to 0.02 mills, just enough to operate the service area. The hospital is so self-sufficient they pay their own bills,” said Gary Knopp, assembly president and chair of the task force, which wrapped up its meetings April 26 with a recommendation that the assembly investigate modifying the current lease and operating agreement with CPGH, Inc., retaining borough ownership and control of the facility.
The hospital also is not lacking in community support. The past year of public meetings has included a parade of testimony — from employees, physicians, patients and taxpayers — speaking to how much they appreciate the hospital, how they depend on it, how important it is and how they don’t want to lose control of it. Some were so vehement they delivered their statements with raised voices and pointed fingers, and others so impassioned they paused to wipe away tears.
In this discussion of change, beyond all the questions of what and how, was the question of why.
“Everybody was asking why? Why do we need to change? What’s broken that needs to be fixed? Absolutely nothing today is broken. There’s no immediate need because (the hospital) functions very well,” Knopp said. “Our concern is in the future going forward. Our concern is five years down the road when this Affordable Care Act is enacted. Our concern is we’d be remiss in not doing something, at least looking into it.”
Change is coming, as inevitable, as the saying goes, as death and taxes. Major, but still-up-in-the-air, factors loom on the horizon that could significantly alter the hospital’s financial position — such as changes in federal Medicare and Medicaid reimbursement rates and changes to the way insurance companies make payments for services. The goal for policymakers in this issue is to find a way to change to meet the coming storm of uncertainty so that the hospital is still financially healthy, supported by the community, a provider of quality care and not too much of a burden for the taxpayer.
“Our hospital kind of stands out there on its own because we do so very well,” Knopp said. “… But, boy, I’d hate to not make a change and find out it’s a mistake in the future. That would be my fear.”
The CPGH, Inc., board and administration identified several factors in the current governance structure that may not be causing insurmountable hiccups in operations now, but could be larger problems in attempting to meet changes coming in the future — particularly, being beholden to approval by the assembly for any major decisions or substantial capital expenditures.
“The thing they’ve recognized is the particular form of governance they’re under now is very cumbersome to them as they try to react to changing market conditions. It slows down what they’d like to do,” Knopp said.
Though there is not universal agreement on how much of a problem each particular point may be — such as access to capital and a slow public process — there is general consensus that forces in health care beyond the borough’s and hospital’s control are changing, and the hospital needs to be ready for it.
“I think that we can all agree that the status quo will not work. We cannot remain the way we are and hope to have a viable hospital 10 or 15 years in the future. The health care world is just changing too much and we will not be able to survive unless we make some changes,” said Linda Murphy, a member of the assembly and task force. “… If you’ve got to be in the hospital this is one of the best places to be. I received great care. I don’t want that to change, and that will change if we get to the point where we’re losing money instead of being in the financial position that we’re in now.”
If that’s the why — change is coming, like it or not — the next immediate questions are what changes to make, and how? The options considered are as varied as opinions over them. Sell the hospital? Form a partnership? If so, with a nonprofit or for-profit entity? Or, as the task force recommends, modify the current governance structure?
But before that can be decided, yet another question has wriggled to the forefront — when?
Forces are swirling on the horizon, with a major change under way in the country’s health care system due to the Affordable Care Act, industry trends still developing, and federal and state financial issues in flux, it’s difficult to form a clear picture of what, exactly, the horizon will look like when it becomes the here and now. So, is it best to weather changing winds as they come, or to batten the hatches in advance without knowing exactly what the storm will bring?
Some see value in getting while the getting’s good. The hospital currently is a profitable, valuable asset, which places the borough in a position of power for negotiating with potential partners or buyers.
“My belief is that there are some substantial negative downfalls if we don’t take advantage of the high capital, the market value of our property right now. We have been talking about services and are we willing to innovate and integrate? And then, in the very next breath we hear about projected declines of these subsidized revenues. You’re not going to be able to maintain the standards you have when you have substantial declines in revenues,” said Jim Golden, task force member and member of the Central Kenai Peninsula Hospital Service Area Board, which represents service area taxpayers.
Having a profitable asset gives the borough more chips with which to bargain, to get more money, local control or other benefits out of a potential deal. Proponents of preventative change worry that if Medicare and Medicaid reimbursement rates change — as they almost certainly will — if the state of Alaska changes its Certificate of Need policy (see next week’s story), or one of a number of other possible changes happen and have a negative impact on the hospital’s finances, the borough may be in a weaker bargaining position.
“We have an asset that I believe is never going to be worth more tomorrow than it’s worth today,” said John Hoyt, task force member and member of the CPGH, Inc. board. “I visited four hospitals with the Inc. board. They were broke. Every offer that they were made when they had to do something was significantly less than what they would have gotten had they moved sooner and quicker. To do nothing here, if we were to sit back and wait until we hurt to make that decision, would be a very irresponsible decision on our part.”
On the other side of that coin is the argument that major change now is premature.
“Here we went to voters and have a new facility. We have no urgent need for capital. Why would we sell and why would we lose local control and why would we give up what we have that works? Patients are more concerned with having a good, quality hospital, not profitability,” said Dr. Kristin Mitchell, an internist in private practice in Soldotna.
Too many factors are up in the air to make a decision now, said Dr. John Bramante, also a private-practice internist in Soldotna. Changes in health care will no doubt affect Central Peninsula Hospital, but they will also affect any entity in the health care industry that the borough may decide to sell to or partner with. Without knowing what those effects will be, Bramante advocates not making any major changes.
“Why do I want to hook up with them now when we actually don’t have to? We don’t have a capital crunch this minute. Maybe later on, and I’ll need to acknowledge that if we do. If (Certificate of Need) goes away or when we lose our good compensation on Medicare funding years from now, we may be hurt financially. We may have to couple with the big pockets. But these guys may not be the big pockets then, either. We don’t know that, so I think the message ends up being, when the revenue stream changes, what is going to be our relationship with the mothership? And that worries me,” Bramante said.
For now, the answer to when is “not yet.” That doesn’t mean voters won’t be asked to approve more-substantial changes in the future, but at this time, the majority of the task force endorsed the option that most leaves well enough alone — that the assembly investigate changing the current lease and operating structure.
“Mr. (Charlie) Pierce (assembly member and alternate of the health care task force) says, if we look back five years, we can say that we’re much stronger now. But if we look forward, Mr. Hoyt says we’ll be worth less. I’m trying to figure that out, how we can be much stronger and then worth less in five years. I would think that if we continue on the process we still can be worth more,” said Tim Peterson, member of the task force and chair of the service area board, in the final task force meeting April 26. “… I think everybody here agrees with the idea that we have to change to survive. I don’t think we have to go all out on this. I hope that discussion doesn’t stop. The assembly has been tasked with this. I hope that the assembly takes it on.”