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Snoqualmie Valley Hospital may go to Overlake | District exploring autumn sale
The foundation is poured, the walls are up and the tower cap freshly lifted in place at what, for now, is the future Snoqualmie Valley Hospital.
When it opens, however, the new hospital may be a branch of Bellevue’s Overlake Hospital Medical Center.
King County Public Hospital District No. 4, the rural district centered on Snoqualmie, is considering selling its hospital and clinics to Overlake. The district’s board of commissioners approved a letter of intent to negotiate a sale at their Thursday, July 3, regular meeting.
District CEO Rodger McCollum said Wednesday that the sale is sought so that Valley health care can compete and survive.
With large Accountable Care Organizations, or ACOs, forming in Washington, made up of partnerships between some of the biggest hospitals—among them Overlake— smaller hospitals are challenged to stay independent, he said.
These contracting units are “how health care is going to be rationed in the future,” McCollum said. “This is the driver, the roll-up of health care into these large affiliations of providers to cut costs out of the system. What that means for us is that, in future, we’re either aligned or somehow connected to large networks of health care, or we run the risk of being orphaned out here.”
The hospital’s critical access status, in which it gets reimbursed fully for Medicare costs, has been key to its financial model.
“If that’s in place, and once we open the new hospital, we would do very well,” McCollum predicted.
But “health care has changed,” he added. “If we’re orphaned out here, and we don’t get the referrals, and we don’t get people in the hospital, we wouldn’t survive for long. It’s too risky.”
“What if we close again? That’s a fear that haunts all of us. How do we eliminate the possibility, and improve health for everyone?” McCollum added. “At the end of the day, we’re negotiating on behalf of our community.”
In a statement, J. Michael Marsh, CEO of Overlake Medical Center, said both organizations are deeply focused on health care needs of the Eastside.
“Our organization’s vision of providing exceptional quality and compassionate care to every life we touch is very much in line with Snoqualmie Valley Hospital,” Marsh stated. “We both share a strong focus on quality, innovation and collaborative care.”
The district board approved the letter, with commissioners Joan Young, Dave Speikers, Dariel Norris and Ryan Roberts voting in favor over lengthy objections from commissioner Gene Pollard.
First, he raised concerns over the letter itself, going back and forth with hospital attorney Jay Rodne.
“Only the board has authority to enter into this contract,” said Pollard, questioning a confidentiality agreement entered into by the administration, with Overlake, dated Dec. 2, 2013, concerning the affiliation negotiations. “That was not a board action.”
“There are lots of contracts we enter into on a daily basis,” Rodne replied. “This entering into a confidentiality provision does not violate any legal or professional standard.”
The letter of intent refers to the confidentiality agreement as an attachment, but "it is not attached. This document is incomplete,” Pollard complained.
“There was no reason to attach it because now, it is subject to open discussion at a public meeting,” Rodne said.
“That sounds like a bunch of lawyer talk,” replied Pollard.
Pollard continued to press on how the sale was presented to the board. He said he learned of it a few weeks ago, but later found other board members had been in the loop on negotiations.
“This kind of obscurantism has got to stop,” Pollard said. “We’ve got to be transparent and open with the public, and certainly with all commissioners treated the same.”
“Everything you’re saying, Gene, is valid,” commented Norris. “At this point, we need to move forward. We need to decide…. You and I ran (for election) on the idea that this hospital district needed something to be viable. If we really want it to be viable, we need to think outside the box.
“Many families already identify with Overlake. They’ve delivered babies at Overlake…. it has been the closest hospital for 50 years.”
“I am not against affiliation or selling the hospital,” Pollard answered. “I want to make sure that the interests of Valley residents, and the people that have been paying taxes, including me, for 30 years, get a fair shake in this deal. I don’t see that—yet.”
Things could change, and the board could get a better offer, Pollard told the board.
“If somebody comes by the next day and says, ‘I want to pay you cash for your hospital,’ we couldn’t do it!” he said.
“We have been searching for a better offer for a long time,” replied Speikers. “This has been on the forefront of many meetings for years.” The hospital looked at several alliances, but “nobody wanted us. Now we have a new hospital. Now we have something to put in the pot.”
“This district belongs to the people,” Pollard said. “I ask for a public hearing before we sign this document... If the people of the Valley want to go through this buyout, I’m all for it. But I don’t want this to be a deal where the people… feel disenfranchised because the district that they have built is now under the control of another entity.”
He called for the letter to be tabled. That motion failed for lack of a second.
“If we don’t sign this, we don’t have anything to talk to the public about,” said McCollum.
Contracts will be explored this summer and fall. The deal will be signed, McCollum expects, in November, “to correspond with the opening of the new hospital under the Overlake banner.”
Following the sale, McCollum expects a transition process of up to two years.
The district itself would not go away under the acquisition, “and can’t go away until we pay off our debt,” McCollum said.
The future of the taxing district lies between two extremes of possibility. At one end, the district could use all its revenues to pay off its debt of about $40 million, and dissolve. Or, it could continue its mission, run its local clinics and find other ways to support wellness and prevention in the Snoqualmie Valley.
“Our district, the commissioners, can still play a huge role in the health care world, going forward,” he said. They can use their tax authority to provide grants and support early intervention, for example. “That’s up to them to decide.”
McCollum’s role as administrator ends after the sale.
“I won’t be part of the deal. I will finish out my contract with the district.”
The hospital district saw revenues of $25 million in 2012, the last year available, with a $403,000 profit
The district is in the midst of construction of a $38 million, 70,000-square-foot new hospital on Snoqualmie Ridge. The district committed to a new building in 2007, and later sold its old campus between Snoqualmie and North Bend to the Snoqualmie Tribe for $14 million.
The hospital’s original plan was to lease back and eventually purchase the new hospital, which is being developed by The Benaroya Company.
The hospital district also owns 22 acres of land on the opposite side of Snoqualmie Parkway, the former Leisure Time campground. The city of Snoqualmie is appealing a King County Growth Management Hearings Board decision that would keep that land outside of city limits.
Snoqualmie Valley and Overlake will negotiate over staffing of the new hospital, and who will stay.
Another question is whether Overlake will buy the land along with the hospital building.
“Those details have to be worked out over the next couple months,” Rodne said.
The deadline for the board’s decision is October 6. If agreements aren’t in place by then, the letter of intent expires.
This summer, Valley residents will get their say on whether the Snoqualmie Valley Hospital should become part of Overlake Medical Center
“We want to know what the future of this hospital district looks like,” hospital district commissioner Dariel Norris told the audience at last Thursday’s board meeting, “whether it’s with Overlake, as an entity of itself, or with somebody else. What’s going to determine that is what the people want and will use.
“We need to know what you, your neighbors, want from your public hospital district,” Norris said. “Not just the hospital, but the district as an entity, which can do a lot of different things. For it to do what it needs to do, it has to hear from the citizens. Put the word out there that we’re having a retreat, and we are open to discussion, and want to hear what you want to say.”
The matter will be a topic at the board’s upcoming retreat, 10 a.m. to 4 p.m. Thursday, Aug. 7, at the Cedar River Watershed Education Center, 19901 Cedar Falls Road S.E., North Bend.
There are also two more board meetings before the October deadline, 6:30 p.m. on August 7 and September 4, both at Snoqualmie City Hall.