Sitka’s local hospital is in trouble. Deep financial losses that have only just become apparent have shaken the institution, and have cost the chief financial officer his job.
Sitka Community Hospital will ask the Sitka assembly for a $1-million loan this week, but city officials are not calling the emergency infusion of cash a fix.
The Sitka Assembly will consider Sitka Community Hospital’s request for an increase of $1-million in its line of credit when it meets in regular session Tuesday evening (12-23-14).
Sitka Community Hospital. Working to get a handle on the crisis, city administrative officer Jay Sweeney says, “this didn’t happen overnight.”
Following the abrupt departure of hospital CFO Lee Bennett earlier this month, city hall assigned Jay Sweeney to triage the hospital’s finances.
And it’s not a very pretty picture.
“The analysis that I’ve done shows that there is no singular event, no one thing that happened that suddenly made a very profitable organization turn unprofitable overnight.”
Since Bennett’s departure, both the Sitka Assembly and the hospital board have met in separate closed-door meetings, under the umbrella of attorney-client privilege. But with a $1-million dollar funding request in play, both city chief administrative officer Sweeney and municipal administrator Mark Gorman agreed to openly discuss the problem with KCAW.
Here it is: Beginning about seventeen months ago, in the summer of 2013, Sitka Community Hospital began to lose money. Monthly net operating income dipped down to about $38,000, and then tipped into the red. Since then, the hospital has spent $2.2-million more than it has brought in.
Sweeney says borrowing money from the city won’t solve the problem.
“It buys time.”
And it’s not necessarily any one individual’s fault. Even though former CFO Lee Bennett left his post in early December.
“It’s not a problem peculiar to Sitka. It’s told many times over around the nation.”
Mark Gorman is Sitka’s city administrator, but he’s also a career professional in health care.
“Community hospitals are marginal in terms of their profitability. And many of them have to depend on subsidies to provide service.”
Sitka Community Hospital is owned by the city, and administered by an independent board appointed by the assembly. Financial problems have surfaced before, and they’ve been addressed in various ways. There’s a local tax on tobacco, for instance, that goes directly to the hospital as part of a monthly city contribution. It’s really variable, ranging from $21,000 in December 2013, to over $170,000 in April 2014. The city also provides the hospital with a $500,000 line-of-credit — which is tapped out.
But the biggest problem is simply a lack of patients to fill the hospital’s twelve beds, especially now that the tribally-operated Southeast Alaska Regional Health Consortium — or SEARHC — has opened Sitka’s Mt. Edgecumbe Hospital to the general population.
“I think the situation in Sitka clearly is more complicated because there are two hospitals competing for the same patients. And when we look at the financials going back 17 months, profitability is dependent on one or two patients. If you lose those two patients, you could be in the red. So the margins are very, very slim.”
Mark Gorman says the community hospital is a “tremendous” community asset, and local government is very motivated to find a solution that works for all Sitkans — even if it means changing the landscape of healthcare in Sitka. Gorman spent much of his career as a vice-president in Community Services at SEARHC. He knows collaboration — if it happens — will not come easily.
“I think there’s a challenge embedded in that. There’s history on both sides of the channel between SEARHC and Sitka Community Hospital. I think to find solutions to the issues before us, we’ve got to put some of those issues behind us, because therein lies the possibility of a solution.”
Jay Sweeney has been assisting newly-hired CEO Jeff Comer address the hospital’s cash-flow problems. In fact, he’s working over there daily. The close proximity has helped Sweeney understand the hospital’s finances, and suggested an answer.
“Belt-tightening won’t get you there. There has to be a fundamental change in the healthcare paradigm, somewhere within the entire landscape, in order to restore profitability and positive cash flow to Sitka Community Hospital. And it’s going to take some collaboration and creativity to come up with that. But more than anything it’s going to take some decisions. Simply giving more money to the organization and leaving the status quo in place will just cause the problem — in my opinion — to resurface again.”
Sweeney says he’s working with Comer and the remaining financial staff to try and understand the hospital’s profit centers. Long-term care, the outpatient clinic, and OB services, for example, all play a role in the hospital’s sustainability. But it’s not clear how much each sector earns.
“This is critical information,” Sweeney says, “to help put a plan together as to what makes sense and what doesn’t.”
Note: Sitka Community Hospital CEO Jeff Comer was out of town on a family emergency when this interview was recorded. Although he expressed a willingness to participate via Mark Gorman, KCAW News chose not call him at this time. We plan to include his views in future coverage of the hospital as this story evolves.
