Hospital sale: Preserve Valley role in Overlake negotiations, residents say

Residents told King County Public Hospital District 4’s board of commissioners Thursday, Oct. 2, to protect of local rights and services at the first public hearing on the hospital’s affiliation with Overlake Hospital of Bellevue.

The board is considering selling its hospital and clinic operations to Overlake. Commissioners Ryan Roberts and Dariel Norris are part of a negotiating team working with Overlake on terms of the deal, which has a new deadline of March 2015.

If the board approves an agreement, the new hospital rapidly taking shape on Snoqualmie Ridge would open next March under the Overlake banner. The hospital’s existing Meadowbrook campus was sold to the Snoqualmie Tribe.

Several residents wanted an explanation why the district needs to offer its operations to a bigger partner.

“Frankly, I’m wondering why you’re thinking of giving it up,” said Fall City resident Nancy Moore. “I had trouble finding what benefits this would have to the hospital district.”

She and her husband Del were among a number of residents who asked that the district preserve funding for the Sno-Valley Senior Center under the new deal. The district provides $60,000 per year for the center’s Adult Day Health program, which “provides people with relationships, activities that stimulate the mind, exercise programs,” plus an important respite for caregivers, Moore said.

The board will tell Overlake that programs like the senior center deserve continuing support, said Roberts, commit post-hospital tax funds, or “give you sufficient runway to figure out how to continue that mission with funding from somewhere else,” he added. “We would like to figure out how to continue these missions.”

“As long as we’re paying tax dollars, we want to see something tangible from them,” added Norris. “We don’t want them just to go so some large entity that isn’t personal… That’s not what public health is about.”

“We’re not distressed. Our balance sheet is still strong,” Roberts told the audience. “But there’s also a great deal of uncertainty about the future. Increased mergers, the way health care will be delivered in the future, how insurance plans fit into narrow networks—We’re not the only community hospital that is faced with these questions about whether their business is relevant as a stand-alone entity. We’re not at the point of being in a fire sale. But if a few rules change down the road from now, we certainly could be.”

Debt and Critical Access

“There’s a lot of misunderstanding about what we owe and what we’re getting ready to take on,” Roberts told the audience earlier in the meeting.

The hospital has about $40 million in back debt and will be assuming an additional $38 million for new construction.

“I want to temper expectations,” Roberts said. “I don’t think there’s any magic bullet for the $40 million in debt. Overlake isn’t going to write a check to pay that off.”

“We’re going to be paying out $286,000 a month in rent,” said Dariel Norris, as lease payments for the new hospital. “Right now we’re not paying any rent.”

A large percentage, 76 percent of that lease amount, is expected to be made back by critical access dollars, replied hospital district attorney Jay Rodne.

“If we keep our critical access,” commented commissioner Gene Pollard.

“That’s a big if,” added commissioner Dave Speikers.

As a rural, federally designated Critical Access hospital, Snoqualmie Valley gets 99 percent of its costs from Medicare patients reimbursed by the government. But Critical Access may not be around in the long run.

“The loss of our Critical Access reimbursement is a significant risk,” Rodne said. “We don’t know how that’s going to play out.

Overlake is also factoring that into their analysis. They presume that Critical Access status will be gone in anywhere from three to five years.”

Pollard said he’s worried Overlake will back out of the deal if the hospital loses that status. The hospital would still be stuck with the cost of putting a value on its hospital and clinics, an analysis expected to cost as much as $50,000.

“That’s an important negotiating point,” commented Roberts.

Snoqualmie resident Carol Peterson questioned whether Overlake was taking on the Valley hospital for access to Critical Access.

“Critical access status is valuable. That’s the key thing we’re bringing to this deal,” answered Rodne. “Overlake could allocate some cost overhead from their (Interstate) 405 campus to the hospital here. They could attribute some of their costs in Bellevue to operations in Snoqualmie.”

North Bend resident Grant Edwards called on the board to “Bring the hospital vote to the people,” after petitioning neighbors in the Forster Woods neighborhood. “I believe we haven’t done due diligence,” he said. “We’re talking about a $38 million facility here, and we’ve allowed one entity to bid on this. We should have opened up to other groups… In the community we have, Snoquamie Ridge keeps expanding, young families—it’s going to be a bucket of gold for someone.”

By not allowing other parties to get involved, “we the residents may be put into a legacy of debt without direct plans to recoup taxpayer funds,” Edwards stated in his petition.

The district has been courted by or sought partners in the past, replied commissioner Joan Young, and had been rejected or found its potential buyers wanting.

“Every negotiation is going to require an exclusivity provision,” commented Rodne. “You get to a certain stage where you have to start sharing confidential information.”

“We don’t actually have a lot to sell,” said Roberts. “We have a piece of land, a certificate of need, and a lot of intangibles. We have a young community in Snoqualmie Ridge… but it’s a community that doesn’t use the expensive kind of health care.”

Snoqualmie resident Joe Larson urged the district to seek a specialist experienced in hospital mergers and acquisitions to advise it in the process with Overlake.

“It would be a huge relief to have someone in our corner… who knows what it’s like to negotiate. For all our sakes, engage someone… directly,” Larson said. “Here we have in the course of one year, massive change, where we’re creating a new hospital, and selling it. That’s like taking 50 years of any other district and compacting it. To try to do that without input is just not taking advantage of the experience that is all around us.”

Plan ‘C’

One unknown in the positive column is the value of the hospital’s former Leisure Time property, Speikers said. He called for a report from staff in the next few weeks on how the hospital district can serve and survive without a buyout.

“I would really like to have a ‘Plan C’ strategy meeting in the next couple of weeks,” Speikers said. “I want something on paper, if we need to restructure, or whatever we need to do. I want to see an analysis done on how many outpatient procedures it would take to keep us profitable without Critical Access. I really need to have some analysis and strategy, just in case. I don’t feel like giving away the farm, so to speak.”

• Negotiating sessions between Overlake and the Valley hospital district are in closed sessions. The final agreement will be made public before the board votes on whether to accept it, in a public meeting. Additional comment will be taken. To e-mail or call a Hospital District 4 commissioner, use the contact information at http://www.snoqualmiehospital.org/about/board-of-commissioners/.