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CITY OF SEWARD, ALASKA
RESOLUTION 2013 -040
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEWARD,
ALASKA, ACCEPTING THE SETTLEMENT AND RELEASE
AGREEMENT NEGOTIATED BETWEEN THE STATE OF ALASKA AND
PROVIDENCE SEWARD MEDICAL AND CARE CENTER RELATING TO
A MEDICAID RATE APPEAL IN AN APPROXIMATE AMOUNT OF $6.1
MILLION OVER FOUR YEARS
WHEREAS, the City of Seward ( "City ") owns the local hospital and long -term care facilities
which are on the City's behalf operated by Providence Health & Services ( "Providence ") as
Providence Seward Medical and Care Center ( "PSMC "); and
WHEREAS, on February 28, 2013, the Seward City Council approved Resolution 2013 -015,
authorizing negotiations to proceed to settle a rate dispute filed by PSMC with the State of Alaska
Department of Health and Social Services ( "State ") relative to the FY2011 Seward Mountain Haven
Medicaid Rate, which was established utilizing FY2009 as the "base year" for rates to be inflation
adjusted for fiscal years 2011, 2012, 2013, and 2014; and
WHEREAS, the City and Providence are parties to a Management and Operating Agreement
ihror
which provides, in pertinent part, that: 1) the City shall own and have financial responsibility for
PSMC; 2) Providence assumes all rights, duties, liabilities and obligations arising from operation of
PSMC; 3) Providence shall negotiate, prepare and execute contracts in connection with the operation
of PSMC; 4) Providence shall notify the City of any proposed settlement of litigation on behalf of
PSMC involving payment of an amount in excess of $25,000; and) Providence shall not assume or
be liable for any claim, liability, or obligation of PSMC arising from operation of PSMC pursuant to
the Agreement, except where such claim, liability or obligation arises from Providence's negligence
or material breach of the Agreement; and
WHEREAS, the Settlement and Release Agreement substantially complies with the terms
discussed with the Seward City Council when it approved Resolution 2013 -015, with two
exceptions: 1) due to a major computer software migration, the State of Alaska DHSS is anticipating
significant potential delays in processing Medicaid reimbursements, which may adversely impact
their ability to process Seward's claims within the initial 90 -day window that they were committing
to, and instead, the State is agreeing to re- process those claims by December 31, 2013; and 2) the
State of Alaska requires that the parties agree to dismiss this matter with prejudice, thereby
necessitating legal action by the City in the event it is necessary to enforce the terms of this
Agreement; and
WHEREAS, the State's settlement offer will increase the per diem base rate for Seward
Mountain Haven by approximately $137.00 per patient per day, and adjusted rate will be used as the
base rate to be inflated for fiscal years 2012, 2013, and 2014, with a total estimated increased
CITY OF SEWARD, ALASKA
RESOLUTION 2013 -040
payment to Seward Mountain Haven resulting from this adjustment over the four -year rate cycle, of
approximately $6.1 million; and
WHEREAS, the Seward City Council met in executive session on February 26, 2013 to
discuss the merits of the settlement offer, approved the settlement offer on February 28, 2013, and
required that the administration bring forward for Council's final consideration and approval, a final
negotiated agreement.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY
OF SEWARD, ALASKA that:
Section 1. In the matter of the Providence Seward Medical Center Case No. 2012- MRC -02
FY2011 LTC Medicaid Rate Appeal, the Seward City Council hereby concurs with Providence
Health & Services' recommendation to approve a settlement offer from the State of Alaska, subject
to the conditions set forth in this Resolution, increasing the per diem base rate for Seward Mountain
Haven by $137.00 per patient per day, which adjusted rate would be used as the base rate to be
inflated for fiscal years 2012, 2013, and 2014. The estimated total increased payment to Seward
Mountain Haven resulting from this adjustment over the four -year rate cycle is approximately $6.1
million
Section 2. The Seward City Council hereby accepts the negotiated Settlement and Release
Agreement negotiated between the State of Alaska Department of Health and Social Services and
Providence Health and Services, in substantial form as attached hereto, and authorized the city
manager to execute said Agreement.
Section 3. This resolution shall take effect immediately upon its adoption.
PASSED AND APPROVED by the City Council of the City of Seward, Alaska, this 28
day of May, 2013.
THE CITY OF SEWARD, ALASKA
David Seaward, ayor
CITY OF SEWARD, ALASKA
RESOLUTION 2013 -040
AYES: Valdatta, Bardarson, Keil, Shafer, Casagranda, Terry, Seaward
NOES: None
ABSENT: None
ABSTAIN: None
ATTEST:
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f J b hanna Kinney, CMC
City Clerk
(City Seal)
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Council Agenda Statement
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Meeting Date: May 28, 2013 a ;,1- 9a
Through: James Hunt, City Manager
Kristin Erchinger, Finance Director
Agenda Item: Final Settlement and Release Agreement Related to Seward Mountain
Haven's Medicaid Rate for 2011, 2012, 2013 and 2014
BACKGROUND & JUSTIFICATION:
The City of Seward ( "City ") owns the local hospital and long -term care facility (collectively,
"PSMC ") which are operated by Providence Health & Services ( "Providence ") under management
agreement with the City. The City is financially responsible for the operations of the health facilities.
Providence has managed the long -term care facility in Seward on the City's behalf since April 2003.
The 2009 year represented a rebasing year for the purposes of establishing Medicaid rates for the
subsequent fiscal years 2011, 2012, 2013 and 2014. The State of Alaska Department of Health and
Social Services ( "State ") established the 2011 rate for the operations of SMH at $538.44 per day.
PSMC filed a Notice of Appeal to these rates.
The Seward City Council approved Resolution 2013 -015 on February 28, 2013, authorizing
negotiation of a formal settlement agreement with the State of Alaska, and requested that the final
settlement agreement be brought before them. Attached is the Settlement and Release Agreement
which was negotiated between the State of Alaska DHSS and attorneys for Providence Health &
Services representing PSMC. The terms of the settlement agreement are consistent with the
information previously provided to Council; namely, that the facility will receive approximately $6.1
million in additional reimbursements over a four -year period, representing approximately one -half of
the amount the City and PSMC felt that PSMC was entitled to claim. The reason for settling this
claim had primarily to do with the potential downside risk associated with a prolonged legal battle,
as well as the State's intent to argue that PSMC is not entitled to either a waiver of the lower of cost
or charges issue, or correction of an error on the submitted forms used as the basis for establishing
rates. In the worst case scenario, PSMC would have been filing four separate years' rate cases with
each case taking an estimated two to four years to resolve in the courts, incurring significant legal
fees with the risk of an adverse legal decision.
Ultimately, the legal fees associated with this matter have been entirely borne by Providence Health
& Services, not by PSMC.
The administration recommends acceptance of the Settlement and Release Agreement.
INTENT:
This purpose of this resolution is to support the terms of the Settlement and Release Agreement as
negotiated by Providence Health & Services with the State of Alaska DHSS, in order to settle this
rate dispute with the State of Alaska and obtain the additional Medicaid claims funds that the facility
is entitled to, as quickly as possible.
CITY OF SEWARD
RESOLUTION 2013 -040
CONSISTENCY CHECKLIST: Yes No N/A
1. Comprehensive Plan (document source here): X
2. Strategic Plan (document source here): X
3. Other (list): X
ATTORNEY REVIEW: X Yes No
FISCAL NOTE:
This resolution does not object to the Settlement and Release Agreement with the State of Alaska. It
will result in approximately $6.1 million in additional funding coming to PSMC over a four -year
period, representing approximately one -half of the funding to which the facility felt it was entitled. It
is fair to expect that at least $2 million of that settlement will come directly to the City of Seward to
repay a loan granted to PSMC in 2011 by the Seward City Council, and be used to cover debt service
costs of Seward Mountain Haven. The remaining funds will be available to PSMC to cover
operational shortfalls, costs, and cash flow.
Finance Department:
RECOMMENDATION:
City Council approve Resolution 2013 -040, reviewing the Settlement and Release Agreement
related to a dispute with the State of Alaska relating to a Medicaid rate appeal.