Valley Hospital, Triad launch information campaign in Valley

MAT-SU -- With a critical vote of their membership drawing closer, Valley Hospital Association (VHA) and their potential capital partner Triad Hospitals Inc. have embarked on an informational campaign to highlight what they feel are the benefits of their proposed joint venture company in Mat-Su.

Last week, VHA CEO George Larson and Triad's Jeff Forshee addressed both the Palmer and Wasilla chambers of commerce. Representatives from Triad also met with some other groups in the Valley, and the proposed partners also hosted a press conference on Friday morning. Soon, VHA's members will decide whether the proposed joint venture company should go forward. For the proposal to pass, at least 10 percent of VHA's members need to take part in the vote, and two-thirds of them must approve of the joint venture. Forshee's presentations focused largely on why he and the VHA board believe those voters should vote 'yes.'

VHA has sought a capital partner for some time to address what the VHA board sees as a critical need to expand the hospital to meet the needs of the fast-growing region. Currently, VHA operates a 39-bed facility in the Valley. Hospital spokesperson Elizabeth Ripley said the demand for those beds is already more than maxed out.

"Right now, our ICU and our [medical surgery unit] are running at 115 percent," Ripley said. "The way hospitals work is that, ideally, they run at 85-percent capacity. You don't want to run at 100 percent, and obviously 115 percent just isn't going to work."

The inability to provide space to patients has forced Valley Hospital to refer patients to Anchorage facilities, according to Ripley. That inability to provide care compounds the hospitals difficulty in competing with Anchorage health care providers.

"Right now Valley Hospital has less than 50 percent market share in the Valley," Ripley said. That means more than half of people seeking medical care do not use Valley Hospital. In fact, nearly 67 percent of Valley people fulfill their health care needs outside of the Valley. "Even at that poor market share," Ripley said, "we're running out of beds -- running out of room."

Ripley added that the association had looked at several ways to expand the hospital to meet the growing demands of this community, including ways to keep the ownership 100 percent local, but a partnership emerged as the most logical choice, and Triad looks like the best fit, she said.

During his presentation at the Wasilla Chamber of Commerce meeting last Tuesday, Forshee spoke to the challenge faced by many non-profit hospitals like Valley Hospital.

"One of the problems facing non-profits is that they accrue a lot of long-term bond debt," Forshee said. "At some point they can no longer borrow money. They're up to their borrowing capacity."

In fact, according to Ripley, VHA carries about $88 million in bonded debt. Triad will bring somewhere in the neighborhood of $75 million dollars in capital investment to the new JV company -- money that Valley Hospital could not raise on its own, according to Forshee. That infusion of cash will build the new facility, fill it with the latest in technology, staff it with qualified doctors and ensure future growth, Forshee said. The other benefit is that the new company will start debt-free. What VHA brings to the economic table is their net worth, estimated at around $25 million. If those are the final numbers, that would mean Triad would be the majority owner of the new company at 80 percent ownership, and VHA would own 20 percent of the new JV company.

Forshee said that after one year VHA could opt to sell its portion of the company, and after one year and for up to 10 years, the local group could also opt to buy up to an additional 10 percent share of the new company.

That new, debt-free company will operate a brand new, state-of-the-art hospital centrally located between Palmer and Wasilla. The two-story hospital will nearly double the current bed capacity to 75 beds, and it will also be designed so that a third floor -- and potentially 75 more beds -- could be added without much difficulty or any disruption of service, according to Forshee. He said the new hospital would also offer services and technology currently not available in the Valley.

He explained that the current hospital in Palmer will likely be leased out to another company -- possibly for use as a nursing home, assisted living facility, psychiatric center or some other health-related facility. The Wasilla campus will likely operate as a medical office building with physician's offices, administrative space, classrooms and possibly the company's business offices. The pharmacy in the Wasilla building will also continue to operate, Forshee said.

The issue of local control has been a topic of conversation since the joint venture was proposed, and both Ripley and Forshee said that was an important part of the negotiating process. Forshee said Triad realized local control was important to the current board and to people in the Valley. He said Triad is committed to keeping that control a reality.

In terms of governance, Forshee said the new company will operate two boards -- similar to the way VHA operates now. The new joint venture board of directors will be responsible for governing the day-to-day operation of the hospital. Even though Triad will own 80 percent of the company, they will only control 50 percent of the board of directors, Forshee said. The other 50 percent will be selected by VHA. Not only will half of the board be locally appointed, but they will also employ a block voting process that will ensure that neither partner can dominate board decisions. For instance, if it is a 10-member board, five members would be appointed by Triad and five by VHA. With a six-member majority required to pass a resolution, block voting would require that at least three of those votes come from the VHA appointees. Ripley said that is a critical guarantee that local control will not be compromised.

Ripley also believes the new hospital will have a strong economic impact on the Valley. She said the hospital will require a network of private physicians and support people that will bring a number of high-end jobs to the area. VHA is also hoping to convince Mat-Su College to include nursing and other health-related classes to their curriculum so that people can train for those jobs close to home.

Whether it is this joint venture with Triad, or whether another company moves in and builds its own hospital in the future, Ripley said she is convinced the Valley will get the health care facility it needs. This venture, she believes, is a way for the community to have a say in how that facility is built and operated.

"If you ask me," Ripley said, "in the long terms this community is going to get what it needs. We have a chance to be proactive and do that in a positive way that's not destructive."