Locals grill hospital company

MAT-SU -- Valley Hospital Association's (VHA) suitor came calling last week and met with VHA members to answer questions about a proposition to enter into a joint venture with the local non-profit and build a new 75-bed hospital to replace the hospital in Palmer.

"We've dated I guess for several months and we got engaged back in September, but we're not married yet. We're still doing due diligence on them, and they're doing due diligence on us and of course we have to get the approval of the membership," said Jeff Forshee, V.P. of development for Triad Hospitals Inc.

VHA operates with a dual-board structure, and both boards voted unanimously to pursue the joint venture with Triad. A capital partnership has been on the radar screen in the VHA board room for years and is part of the board-adopted long-range plan. Last year, the hospital's operating board hired CEO George Larson and assigned him the task of seeking out a large capital partner.

At least 10 percent of VHA's 2,288 current members must vote on the issue to make the election valid. Of those who vote, two-thirds must approve the joint venture in order for negotiations to proceed. Larson and VHA spokesperson Elizabeth Ripley said the hospital doesn't have a scientific poll that shows how close the vote will be.

"It's a guess," Larson said. "We think that we're going to get the two-thirds, but we don't have anything solid -- other than our thoughts and our efforts."

The hospital does have one recent poll, but Ripley said it didn't target members only and was conducted to gauge community support for the replacement hospital in anticipation of state licensing

requirements.

"Getting membership support is critical, but beyond doing that we have to show strong community support for this venture -- and we've done that," Ripley said. Polled were 304 Valley residents, and 72 percent said that they would "strongly" or "somewhat strongly" support building a replacement hospital somewhere between Palmer and Wasilla, according to Ripley.

Every VHA member was mailed an invitation to last week's presentations and Forshee also presented at local chamber of commerce meetings and in other forums such as area senior centers. He's made two trips to Alaska in the last month.

After Forshee's presentation in Palmer local minister Howard Bess took the microphone and delivered an ardent plea for the hospital to remain independent. Bess -- who has publicly criticized the hospital board for their anti-abortion stance -- described local nonprofits as the "heart and soul" of the community.

"[The nonprofits] are ours and because they are ours we claim them as a part of the community," Bess said. "You're talking about the heart and soul of our community, and you're taking about selling a piece of your soul."

The joint venture will not eliminate VHA. Rather, the nonprofit will become a minority partner in a hospital with Triad as majority owner. Triad expects to put up $75 million and VHA will contribute all of its existing assets and receive profits from the joint venture on a pro-rata basis. If VHA's holdings are worth $25 million and Triad contributes $75 million to build the hospital then VHA would receive 25 cents out of every dollar the new hospital earns. VHA's exact ownership won't be known until third party auditors evaluate the nonprofit's current assets.

Forshee said Wednesday that he expects that 20 percent would be the lowest that VHA's ownership would be. No matter what the share, VHA will maintain 50 percent of the board members of the joint venture.

Ripley described the question before the members as both "a painful decision" and "a chance to be pro-active." The Valley's health care needs are growing, the hospital is losing market share and VHA's earnings are narrowing, according to Ripley.

If the state drops the current certificate of need (CON) laws which protect VHA from competition, then new hospital beds will be built in the Valley and VHA will continue to lose market share, according to Ripley.

"Our very own Valley legislators are lobbying right now to get rid of the certificate of need. When that certificate of need is lifted, [the competition is] not going to come out here and ask anybody in this room for permission to build," Ripley said.

Competition is already here for VHA on several fronts, among them imaging equipment and doctor's office rental space. Those are two areas of profit in an industry where much is written off as charity. Larson estimates the hospital lost $1 million in revenue due to new competition in diagnostic imaging this year. At both meetings, Forshee told the audience that doing nothing was likely dangerous for the future of the nonprofit.

"You do need a bigger medical delivery system. The marketplace is telling us that, because 63 percent of the business is going elsewhere," Forshee said.

Bess wasn't the only person with an ardent speech last week. No board members showed up at the Wednesday night meeting in Palmer but seven were at the Wasilla meeting, including Dr. Michael Alter, who is chief-of-staff-elect and who will become a voting operating board member next May.

"I'm one of the E.R. docs and I work primarily at night," Alter said. "Every night I go in to work and I usually am told, 'Doc, you got two beds available for the whole night.' Thirty percent of the time I go in and there's no beds available. I look up on my board and I'm seeing Elmendorf has no beds, Providence has no CCU [critical care unit] beds, and Regional has one. And I'm dealing with this night-after-night, after night, after night. I have no place to put people. And it stinks. It's not a good thing."