HomeMy WebLinkAboutRes2008-088Sponsored by: Oates
CITY OF SEWARD, ALASKA
RESOLUTION 2008-088
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEWARD,
ALASKA, APPROVING A MANAGEMENT AND OPERATING
AGREEMENT BETWEEN THE CITY OF SEWARD AND PROVIDENCE
HEALTH & SERVICES - WASHINGTON, D/B/A PROVIDENCE
HEALTH SYSTEM ALASKA, AND APPROPRIATING FUNDS
WHEREAS, the City owns real property consisting of land, a hospital building, and a
long-term care facility in the process of being constructed, together with other improvements
thereon (collectively, the "PSMC Property"); and
WHEREAS, Providence Health and Services, Alaska ("Providence") leased the hospital
property and operated a hospital thereon from June 28, 1996 to April 10, 2003 pursuant to a lease
and operating agreement with the City; and
WHEREAS, the City and Providence eliminated the lease agreement and entered into a
management and operating agreement in April, 2003, when Providence began operating the
collocated hospital and long-term care ("LTC") facilities on the City's behalf, with said
agreement expiring on April 11, 2008, and extended by the Seward City Council until September
23, 2008, pending completion of a new contract; and
WHEREAS, the City and Providence desire to enter into a new contract whereby
Providence will continue to operate Providence Seward Medical and Care Center ("PSMCC") on
the PSMC Property, as a collocated hospital and long-term care facility; and
WHEREAS, the parties desire to continue to provide safe, timely, efficient, effective,
and quality healthcare services to the residents of Seward and the surrounding area, and to
become the State's first Green House-certified long-term care facility, restoring the choices of
daily living to the LTC residents through a transformational model of care; and
WHEREAS, the City Council has previously designated $500,000 for the purpose of
covering hospital operational shortfalls (Resolution 2002-042 and Resolution 2003-045), and
under the new agreement, $500,000 is to be made available to cover current shortfalls resulting
from the rebasing of rates prior to the opening of the new facility.
NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF SEWARD, ALASKA, that:
Section 1. The City Council authorizes the city manager to execute and deliver, in
substantially the form as attached hereto, the Management and Operating Agreement between the
CITY OF SEWARD, ALASKA
RESOLUTION 2008-088
City of Seward, Alaska and Providence Health & Services -Washington, d.b.a. Providence
Health System Alaska.
Section 2. Based on Providence's solid reputation for providing quality healthcare
services throughout Alaska, on the positive relationship which exists between Providence and the
community of Seward, and on the continued positive performance Providence has demonstrated
in managing and operating both the hospital and the long-term care facility in Seward, the
Seward City Council finds and determines that the public interest would be best served by not
requiring competitive bids or proposals before the City enters into the Agreement.
Section 3. The amount of $500,000 is hereby appropriated from the Designated for
Hospital Operations account no. 101-0000-3042, to pass-through account no. 101-1191-5998, to
be utilized for the purpose of covering operational shortfalls in the hospital/long-term care
facility, per the attached Management and Operating Agreement between the City of Seward and
Providence.
Section 4. This Resolution shall take effect 30 days following its adoption.
PASSED AND APPROVED by the City Council of the City of Seward, Alaska, this 8t~'
day of September, 2008.
THE CITY OF SEWARD, ALASKA
Clark Corbridge, Mayor
AYES: Dunham, Valdatta, Kellar, Corbridge
NOES: None
ABSENT: Bardarson, Amberg, Smith
ABSTAIN: None
ATTEST:
._; i `CSC [ G ~ 6~G ~ -
hanna Dollerhidc
Acting City Clerk, CMC
(City Seal)
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Council Agenda Statement
Meeting Date: September 8, 2008
Through: Phillip Oates, City Manage:~~
From: Kristin Erchinger, Finance Director ~t"'" `"
Agenda Item• Contract for Hospital and Long-Term Care Services
BACKGROUND & JUSTIFICATION
Providence Health and Services, Alaska ("Providence") leased the Providence Seward Medical Center ("PSMC")
property and operated a hospital thereon from June 28, 1996 to April 10, 2003 pursuant to a lease and operating
agreement with the City. Under the lease arrangement, Providence was financially responsible for the operations of the
hospital, meaning that any financial losses were covered by Providence. During the period Providence operated the
facility under a lease arrangement, Providence lost approximately $1 million per year.
Beginning in April, 2003, the nature of the City's agreement with Providence was changed from a lease and operating
agreement, to a management and operating agreement. Under this new model, the City became financially responsible
for the operations of the hospital. However, the City agreed to this model only after facilitating collocation between the
hospital and the long-term care facility. Through collocation, the two facilities were able to merge under a single owner
(the City), and a single operator (Providence), achieving significant cost efficiencies in the areas of administration,
nursing, laundry, dietary, facilities maintenance, etc. Since collocating, the Providence Seward Medical & Care Center
("PSMCC") operated in a positive cash position for four years, unti12007. Short-term financial losses were predicted in
the pro forma fmancial projections for the collocated facility, beginning in 2007, until the completion of construction of
the new long-term care facility. The losses result from a rebasing of rates which provides a lower reimbursement rate
(and corresponding annual deficits) from January 1, 2007, until the facility opens. When the new facility opens, the new
reimbursement rates will become effective, which is expected to bring the facility back into a positive cash position.
At its meeting of October 8, 2007, the Seward City Council discussed whether to competitively bid out the operations of
the hospital and long-term care facility, or whether to begin negotiations with Providence to enter a new contract. After
considering a number of factors, including Providence's successful history of providing healthcare services in Seward,
as well as the partnership between the City and Providence in facilitating the migration to a new model of care under the
Green House Model in the new long-term care facility, the Council directed the administration to negotiate a new
contract with Providence. The current management and operating agreement between the City and Providence expired
April 11, 2008, and was extended until September 23, 2008.
The new contract reflects a focus on providing fiscal certainty to the annual operating budget of the PSMCC. The
previous contract provided for a management fee of up to $350,000, as well as the allocation of regional and system-
wide indirect costs to the PSMCC, amounting to an estimated total $1.4 million in 2008. In an effort to mitigate the
uncertain impact of allocated costs on the budget, the new contract moves away from the previous financial model of
management fees, and supports a flat management fee of $800,000. This is expected to save the facility $600,000 over
what was budgeted for 2008, providing more fiscal stability and predictability. In addition, we are transferring the
$500,000 previously designated by Council for hospital operational shortfalls, to the hospital account to cover potential
shortfalls until the new facility is opened in approximately 12 months.
CONSISTENCY CHECKLIST
Where applicable, this agenda statement is consistent with the Seward City Code, Charter, Comprehensive Plans,
Land Use Plans, Strategic Plan and City Council Rules of Procedures.
FISCAL NOTE: This contract is expected to save PSMCC in excess of $600,000 in 2008.
RECOMMENDATION: Seward City Council approve Resolution 2008-+; authorizing an 18-month contract
with three one-year options to extend, with Providence Health & Services.
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