Hospital board ends affiliation process with Astria Health

Board to discuss next steps at upcoming work study.

After several months of searching for an affiliation with a larger health care provider, the Public Hospital District No. 4 board of commissioners unanimously voted to end discussions with Astria Health.

The board decided to discuss the potential options they have at a work study session before taking action on any other plans.

The process began in 2017 as the board hoped to affiliate or merge with a larger health care provider to receive financial and operational support. The hope would be to grow the services the hospital provides the Valley and help absorb the almost $100 million debt the hospital has in limited-tax general obligation bonds (LTGO) and revenue bonds.

Affiliation consultants Sarah Cave and Steve Huebner gave a status update to the board at their regular meeting on March 8. Cave and Huebner recommended the board end their discussions with Astria and move to a “Plan B” that would have the district begin discussions with organizations that showed interest but did not respond to the request for proposals, which include Multicare, Overlake, UW Medicine and Virginia Mason.

According to Cave, Plan B would also include reducing the amount of provisions and regarding the debt, service expansion, excess tax revenues and more.

Cave, describing the process, explained that on Oct. 26, the board voted to continue discussions with Astria and to draft a letter of intent as part of the due diligence process. A negotiation team was formed by commissioners Dariel Norris and David Speikers, the Snoqualmie Valley Hospital Superintendent Tom Parker, General Counsel Skip Houser, and the two affiliation consultants.

After several meetings, the letter of intent was put on hold for further analysis of the transaction structure that Astria proposed. The consultants requested Astria perform financial due diligence necessary to meet bondholder requirements and to begin negotiating the elements of the deal the district felt were important.

According to Cave, Astria’s response was not “in alignment” with the district’s goals for affiliation, which led to the recommendation to end affiliation discussions.

In discussion on the recommended motion, Commissioner Speikers expressed concern about moving on to Plan B, stating that more discussion is needed before making any other moves toward affiliation.

“I don’t think we should rush into Plan B immediately,” he said. “I think we should have, at the next board study session, to talk some more about potential options and I would like to hold off on the Plan B for that reason.”

Speikers made a motion to only discontinue discussions with Astria, which was approved unanimously. The board has agreed to meet at a work study session to discuss their next steps before moving on to any other alternative affiliation plans.

Speikers also was dissatisfied at the process conducted thus far. He said he did not think that the request for proposals process was going to work and that the board should facilitate a process with another consultant. Commissioner Gene Pollard agreed, stating that the district has already spent too much money on the consultants.

“We’ve spent $60 to 70,000 right now on consultants just in this iteration,” Pollard said. “That’s what they told us would be the total cost of their participation that would bring us to some kind of merger or affiliation. We are nowhere near there, we got one bid and we’ve spent at least $60,000.”

Commissioner and board President Dariel Norris closed out the meeting by talking about her discussion with a representative from Overlake about the affiliation.

“It was our debt, our debt was the issue for them,” she said. “We still have debt, but we also have a new facility and we also have money in the bank. Now we are in a different position we were in then … I think a work study would be a good time to (discuss the next steps).”

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