HomeMy WebLinkAboutRes2002-030
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CITY OF SEWARD, ALASKA
RESOLUTION 2002-030
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEWARD,
ALASKA, AUTHORIZING THE CITY MANAGER TO ENTER INTO
AMENDMENT NO.1 TO THE OPERATING TERMS OF THE LEASE AND
OPERATING AGREEEMENT BETWEEN THE CITY OF SEWARD AND
PROVIDENCE HEALTH SYSTEM-WASHINGTON, FORMERLY KNOWN
AS SISTERS OF PROVIDENCE IN WASHINGTON D/B/A PROVIDENCE
HEALTH SYSTEM IN ALASKA TO REDUCE THE TERMINATION
NOTICE PERIOD AND TO PROVIDE FOR PAYMENT OF A PORTION OF
PROVIDENCE SEWARD MEDICAL CENTER'S ANNUAL OPERATING
LOSSES UNDER CERTAIN TERMS AND CONDITIONS
WHEREAS, the City of Seward ("Seward") and Providence Health System-Washington,
formerly known as Sisters of Providence in Washington, doing business as Providence Health
System in Alaska ("Providence") entered into a lease and operating agreement ("Agreement")
effective July 1, 1996, for the purpose of operating the Providence Seward Medical Center
("PSMC"); and
WHEREAS, Providence has approached Seward requesting two amendments to the
Agreement; and
WHEREAS, Amendment No.1 would reduce the termination notice period from 24 months
to 12 months and provide for payment of a portion of annual operating losses above $600,000, in an
amount not to exceed $250,000 annually, to be contributed by Seward for the term of the
amendment; and
WHEREAS, Providence and Seward jointly desire to provide high quality health care
management and to ensure the long term financial health ofthe PSMC; and
WHEREAS, Providence and Seward understand the vital role the PSMC plays in both the
quality of life in and economic benefits to the city of Seward; and
WHEREAS, Providence and Seward desire to continue the existing Agreement but
recognize that events since July 1, 1996 indicate amendments to the Agreement may be desired; and
WHEREAS, Providence and Seward desire to amend the operating terms that are contained
in the Agreement but which do not affect the essential lease terms and conditions within the meaning
ofSCC 7.05.115; and
WHEREAS, Providence has offered to make an annual Community Benefit Grant of up to
$600,000 to PSMC to cover potential losses; and
CITY OF SEWARD, ALASKA
RESOLUTION 2002-030
WHEREAS, Providence and Seward agree to work together with Wesley Rehabilitation and
Care Center toward a co-location agreement that will provide long term financial and health care
benefits; and
WHEREAS, Providence agrees to improve PSMC medical billing and collections; and
WHEREAS, Providence and Seward agree to work together to encourage local area residents
to utilize PSMC for all their health care services in an effort to increase revenues to PSMC and to
increase medical services available in Seward; and
WHEREAS, Providence and Seward agree to work together to protect and enhance federal
and state funding of health care programs; and
WHEREAS, Seward recognizes the important public purpose in financially supporting and
ensuring the availability oflocal public health care services to the people living in or near the City of
Seward and the visitors to our community; and
WHEREAS, the City Council of the City of Seward hereby finds that it is in the public
interest to financially assist PSMC because a public purpose is served by supporting local public
health care services.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY
OF SEWARD, ALASKA, that:
Section 1. The recitals above are incorporated herein by reference.
Section 2. We find that it is in the public interest to approve the attached Amendment No.1
to the Agreement between the City of Seward and Providence Health System-Washington, formerly
known as Sisters of Providence in Washington d/b/a Providence Health System in Alaska, in
substantial form as attached hereto, and the City Manager is authorized to sign Amendment No.1
and make such changes to the amendment as may be necessary to affect the intent ofthis resolution
without changing the substantive terms ofthe amendment as so approved; provided, however Exhibit
A to Amendment No. 1 must be completed to the satisfaction of the City Manager before the
amendment is signed and becomes effective.
Section 3. We find that Amendment No.1 to the Agreement is in substance an operating
agreement due to its effect on the operating terms ofthe Agreement.
Section 4. This resolution shall take effect immediately upon its adoption.
PASSED AND APPROVED by the City Council ofthe City of Seward, Alaska, this CITY
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OF SEWARD, ALASKA
RESOLUTION 2002-030
25th day of March, 2002.
THE CITY OF SEWARD, ALASKA
z~ \\k\'~;
Edgar Blatchford, Mayor
AYES:
NOES:
ABSENT:
ABSTAIN:
Blatchford, Branson, Brossow, Calhoon, Clark
None
None
Orr, Shafer
ATTEST:
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AMENDMENT NO.1
This Amendment NO.1 (the "Amendment") to the operating terms of that certain
Lease and Operating Agreement dated July 1, 1996 (the "Agreement") between the City of
Seward, an Alaska municipal corporation with offices at Seward, Alaska, hereinafter called
"Seward," and Providence Health System-Washington, a Washington charitable nonprofit
corporation authorized to conduct business in Alaska, formerly known as Sisters of
Providence in Washington, and doing business as Providence Health System in Alaska,
hereinafter called "Providence," is effective April
I Or ,2002.
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RECITALS
WHEREAS, Providence and Seward entered into the Agreement for the lease and
operation of the Providence Seward Medical Center located in Seward, Alaska (the
"PSMC"), effective July 1, 1996; and
WHEREAS, Providence and Seward jointly desire to ensure the long term financial
viability of the PSMC; and
WHEREAS, Providence and Seward understand the vital role the PSMC plays in
both the quality of life in and economic benefits to the City of Seward; and
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WHEREAS, Providence and Seward desire to continue the existing Agreement but
recognize that events since July 1, 1996 indicate amendments to the Agreement may be
desired; and
WHEREAS, Providence and Seward desire to amend the operating terms that are
contained in the Agreement but which do not affect the essential lease terms and
conditions within the meaning of SCC ~7 .05.115; and
WHEREAS. Providence has offered to make an annual Community Benefit Grant of
up to $600,000 to PSMC to cover potential losses; and
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WHEREAS. Providence and Seward agree to work together witt:! 'A'c:3lcy
R9RaeilitativII C1I,e1 Care CSFltcr to..al'd a co-location agreement that will provide long term
financial and health care benefits; and
WHEREAS, Providence agrees to improve local medical billing and collections; and
WHEREAS, Providence and Seward agree to work together to encourage local area
residents to utilize PSMC for all their health care services in an effort to increase revenues
to PSMC and to increase medical services available in Seward; and
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WHEREAS, Providence and Seward agree to work together to protect and enhance
federal and state funding of health care programs.
NOW, THEREFORE, in consideration of the mutual exchange of the promises of the
parties, the parties agree to amend the Agreement as follows:
Item 1. Delete paragraph (c) of Section 13, "PSMC Operations," and substitute in its
stead, the following new paragraph (c):
(c) All revenues and cash collections from patients, third-party payors
and other sources billed and collected by Providence, and arising out of or
related to services rendered during the Term, shall be used to offset
operating expenses of PSMC incurred beginning January 1, 2002.
(1) The excess, if any, of such revenues over such expenses
calculated for each calendar year ("Profits", as more specifically
defined in Exhibit A attached hereto and incorporated by reference)
shall be split 50/50 between Providence's account and an equipment
and maintenance fund (the "E&M Fund"), which can be used for
equipment purchases or replacements and maintenance on the
facility. Purchases from this fund shall be the property of Seward.
The E&M Fund and purchases made from this fund are separate and
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distinct from the Repair and Replacement Fund described in
Agreement Section 21, "Additional Equipment Purchases." Upon
termination of the Agreement, any remaining balance in the E&M
Fund shall be transferred to Seward.
(2) The excess, if any, of such expenses over such revenues
for a calendar year ("Losses", as more specifically defined in Exhibit A
attached hereto and incorporated by reference) shall first be paid from
any balance in the E&M Fund, then from a Providence Community
Benefit Grant of up to $600,000 per calendar year; provided, however,
if the Losses exceed $600,000 in a calendar year, Seward will
contribute to Providence for the calendar year in which the Losses
occurred an amount not to exceed the lesser of (i) the amount of
Losses less $600,000, or (ii) $250,000. If, after the above
transactions, there is a remaining amount of unfunded Losses, such
remaining Losses shall accrue against future deposits to the E&M
Fund.
Item 2. Add to Agreement Section 13, "PSMC Operations," the following new
paragraph (g):
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(g) To compute Losses for purposes of calculating the amount to be
contributed by Seward under paragraph 13(c) above, Providence agrees to
the following limitations and exclusions:
(1) Administrative Fee. The methodology currently used by
Providence to compute the administrative fee it charges to PSMC will
not be changed during the term of this Amendment; provided,
however, Seward recognizes that the actual percentage allocated to
PSMC may change depending on the then current composition of the
Providence Health System in Alaska.
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(2) Excluded Expenses. For purposes of computing Losses
subject to contribution, expenses shall not include (a) claims, legal
judgments, legal fees, settlements, mediation, arbitration or any costs
related to malpractice or other legal claims or actions incurred by
Providence as a result of claims against Providence or PSMC or
disputes between Providence and Seward; (b) capital expenditures by
Providence; and (c) losses on investments.
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(3) Computation. Computation of Losses shall be done on a
calendar year cash basis beginning with January 1, 2002, and be
confirmed by audited financial statements utilizing generally accepted
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accounting principles as recognized in the United States and utilizing
an independent certified public accountant approved by Seward.
Providence shall provide Seward a written computation of Profits or
Losses under this Amendment and audited financial reports with
respect to such computations within 60 days of each calendar year
end. Upon receipt of the written computation, Seward shall have 30
days to review the computation and resolve any discrepancies with
Providence; provided, however, should a dispute exist following such
joint review, the computation of the amount, if any, to be paid by
Seward for any given calendar year shall be resolved by action of the
Seward City Council, whose determination shall be conclusive.
Payment shall be made by Seward on the later of 30 days after
receipt of the approved written computation or 5 days from resolution
of any dispute by the Seward City Council.
(4) Community Benefit Grant. Providence shall provide a
Community Benefit Grant to its operations at the PSMC in an annual
amount of up to $600,000. Providence agrees that a commitment by
Seward to contribute to PSMC Losses is contingent on Providence
first contributing this Community Benefit Grant.
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(5) Reducinq Losses. Providence shall take actions to reduce
Losses by, among other things, improving collections and billing
practices, pursuing cost-cutting measures to operate more efficiently,
and marketing PSMC more effectively.
(6) Council Action Required. Payment by Seward of qualifying
Losses shall be subject to appropriation by the Seward City Council
and certification by an authorized Providence Representative that
Providence is in full compliance with the terms of the Agreement and
that all conditions of this Amendment have been met.
Item 3. Add to Agreement Section 13, "PSMC Operations," the following new
paragraph (h):
(h) Providence shall provide an annual budget to Seward for the
PSMC, and monthly statements comparing actual income and expenditures
to budgeted amounts. Such reports shall be in a form acceptable to Seward.
In the event it reasonably appears that Losses will exceed the Community
Benefit Grant amount of $600,000 and Seward's maximum contribution for
the current year, the parties agree to discuss ways to handle such potential
Losses; provided, however, this Amendment does not obligate Seward to
contribute toward the payment of any additional excess expenses and
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Providence is in no way relieved from its responsibility for such Losses.
Discussions between the parties may include strategies to reduce costs,
change services, or seek additional revenues.
Item 4. Delete Section 31, "Termination bv Providence," and substitute in its stead,
the following new Section 31:
31. Termination bv Providence. From and after July 1, 2003,
Providence shall have the option, in its sole discretion, to terminate this
Agreement upon 12 months' written notice to Seward. If Providence is
required to perform any duty or provide any service under the terms of this
Agreement that is in conflict with the mission and values of Providence, the
remedies as set forth in Section 36 of this Agreement shall apply. No
contribution by Seward for Losses, as described in Section 13(c), shall be
made following notice of termination.
Item 5. Representations of Providence. As ofthe effective date ofthis Amendment,
Providence represents that:
(a) it is in full compliance with all provisions of the Agreement;
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(b) it acknowledges that Seward has paid the annual debt service on
bonds issued to construct the PSMC facility with receipts from a 1 % sales tax
levy on taxable sales in Seward;
(c) in consideration of the promises made in this Amendment,
Providence will diligently pursue management practices and other activities
to strengthen the financial health of PSMC; and
(d) Providence has no plans to alter the current composition of the
Providence Health System in Alaska in a manner that would increase the
administrative fee charged to PSMC.
Item 6. The capitalized terms used in this Amendment shall have the meaning
defined in the Agreement unless otherwise defined in this Amendment. Except as
provided herein, all other terms and conditions of the Agreement dated July 1, 1996,
remain in force and effect. This Amendment shall expire December 31, 2004, at 11 :59
p.m., except to the extent that Losses, if any, are to be paid by Seward in 2005 for
calendar year 2004.
Item 7.
This Amendment shall not be effective until the effective date of a resolution
of the Seward City Council approving this Amendment in the manner required by the
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Seward Code and Charter and the Amendment is signed by both parties. This document
shall not be recorded.
Item 8. In the event any provision of this Amendment is held invalid, void, voidable, or
unenforceable by any court of competent jurisdiction, this entire Amendment shall be
deemed void ab initio; provided, however, that Seward shall not be entitled to recover any
payments made to the date of such final decision of the court. If this Amendment is
deemed void, neither party shall be entitled to any damages or other relief and no liability
shall be borne by either party. The Agreement shall continue according to its original
terms.
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SIGNATURES:
PROVIDENCE HEALTH SYSTEM-WASHINGTON
d/b/a Providence ystem in Alaska
CITY OF SEWARD
By: vJ'A'~
Its: d/.t..., J'Yk^""'"~
Date: S-/IO/O"2--
~--
City Clerk
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ACKNOWLEDGMENTS
STATE OF ALASKA )
) ss
THIRD JUDICIAL DISTRICT )
THIS CERTIFIES that on this ID""\'day of
Public in and for Alaska, personally appeared , to me known
to be the person who executed the foregoing inst ment on behalf of PROVIDENCE
HEALTH SYSTEM-WASHINGTON d/b/a Providence Health System in Alaska. He/she
acknowledged to me that he/she executed the same freely and voluntarily on behalf of said
corporation. He/she stated to me under oath that he/she is the of the
corporation, has been authorized by the Board of Directors of the corporation to execute
said instrument on its behalf, and has full power and authority to execute the same.
IN WITNESS WHEREOF, I hereunto set my hand and seal.
q( I fY\.hL~ \~~ \J.l\ ^--
Notary Public in for AI,~,k~. . he-
My Commission EXPires:~
c al Eta
State C>~ Alaska
KIMBERLV MILLER
NOTARV PUB I
My Commission Expires:
STATE OF ALASKA )
) ss.
THIRD JUDICIAL DISTRICT )
THIS CERTIFIES that on thi~(::)~ay of ~~ ,2002, before me, a
Notary Public in and for the State of Alaska, personally app . red W. Scott Janke, known to
me and to me known to be the City Manager for the City of Seward, Alaska, and is the
individual named in and who executed the foregoing document on behalf of the City of
Seward and acknowledged to me that he executed the same freely and voluntarily on
behalf of the City of Seward for the uses and purposes therein set forth.
IN WITNESS WHEREOF, I hereunto set my hand and seal.
~ m!i-t--c L~ L-f\'LLLw .
Notary Public in d for ~a
My Commission Expires: ,)lJ J('t.~
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EXHIBIT A
Profits:
Net Profit from Audited Financial Statement
Less: Non-cash revenues
Add: Non-cash expenses (such as depreciation)
Add: Excluded Expenses (as defined in paragraph (g)(2) of Section 13 of the
agreement as hereby amended.)
Adjusted Net Profit (50% of this amount goes to the E&M Fund (as defined in
paragraph (c) of Section 13 of the agreement as hereby amended.)
Losses:
Net Loss from Audited Financial Statement
Less: Non-cash revenues
Add: Non-cash expenses (such as depreciation)
Add: Excluded Expenses (as defined in paragraph (g)(2) of Section 13 of the
agreement as hereby amended.)
Adjusted Net Loss