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San Juan Island Hospital District approves PeaceHealth contract—here's what's next

San Juan Island hospital district commissioners approved a contract Wednesday that gives PeaceHealth the right to build and operate a hospital on San Juan Island for 50 years.

The vote was 5-0 and was applauded by the audience of more than 40 islanders and supporters who crowded the meeting room in the Frank Wilson EMS Building.

The vote was anticipated – indeed, district spokesman Alan Roochvarg handed out three-page news releases immediately after the vote. But the sense of history was not lost on the audience. Herb Mason remembered when Dr. Malcolm Heath practiced in a clinic down the street – it had been built in 1957 at a cost of $23,000 and financed by gifts “from grateful patients and summer visitors,” according to a Time magazine story of the day.

Later, in the 1970s, a public hospital district board made the decision to build Inter Island Medical Center to meet the island’s changing, growing medical needs.

“Now, you are in that position,” Mason said.

There were some concerns expressed: Former county assessor Paul Dossett asked that the PeaceHealth-appointed governing board include a member of the hospital district commission, because our property taxes will subsidize medical care at the hospital. Others expressed concern that PeaceHealth, a non-profit with Catholic roots, would not accommodate the voter-approved Death with Dignity law – actually, all doctors at Inter Island Medical Center have opted out of the law -- or accommodate a woman’s right to choose.

But in light of declining Medicare reimbursements for fee-for-service clinics – service at IIMC is reimbursed at a doctor’s visit rate – and the fact that islanders must travel to the mainland for many services, commissioners said they saw no alternative to the PeaceHealth agreement other than to raise property taxes.

“I’m not interested in raising taxes on anybody,” Commissioner Bob Low said. “This is the way out of it ... We’ve got to look at the future. I think this is the right move to make.”

According to the proposed contract, PeaceHealth will bear two-thirds of the cost of buying land for and building the hospital, estimated at $29.8 million. One-third of the cost will be raised philanthropically by the San Juan Community Hospital Committee.

The property taxes you pay now to the hospital district will be passed on to PeaceHealth to subsidize healthcare services.

PeaceHealth will build an EMS facility at the new hospital and sell it to the hospital district, which will presumably use proceeds from the current Inter Island Medical Center property. PeaceHealth will be responsible for all financial liability of the hospital.

The next steps:

PeaceHealth will notify the state Department of Health that it intends to request a certificate of need from the state, certifying that a hospital is needed on the island. It will take the state Health Department about nine months to make that determination, according to Tom Cable, co-chairman of the San Juan Community Hospital Committee.

Upon receiving the certificate of need, the San Juan Community Hospital Committee will request one-third of pledged philanthropic contributions in order to fund the design, permitting and planning of the hospital. By this time, PeaceHealth may have purchased a 10- to 11-acre site for the hospital; two sites are under consideration, Cable said in an earlier interview.

One source said the sites are located near Friday Harbor Airport.

PeaceHealth will seek to get the site annexed into the Town of Friday Harbor (a hospital must be connected to municipal water and wastewater systems). Then, the site will be developed. According to the contract, annexation is expected to occur by September 2010.

Proponents hope construction will begin in 2011, with the hospital opening in 2012. The day the hospital opens, Inter Island Medical Center will close.

The hospital will be overseen by a governing board appointed by PeaceHealth but consisting mostly of islanders. The governing board will be directly responsible for the operation of the hospital, but will provide semi-annual reports to the hospital district commission.

The hospital district commission will continue to be directly responsible for the operation of San Juan Island EMS.

PeaceHealth is a non-profit healthcare system that operates St. Joseph Hospital in Bellingham, as well as other healthcare facilities in Alaska, Oregon and Washington.

Proponents say the hospital will provide many medical services for which islanders must now travel to the mainland. They say it will bring 24/7 medical care to the island, will replace an aging facility, and will yield better Medicare reimbursements for services.

Dr. J. Michael Edwards, a hospital district commissioner and co-chairman of the San Juan Community Hospital Committee, has said maintaining the current level of clinic-based service wouldn’t be possible without increasing taxes. And with projected declines in Medicare reimbursements for fee-for-service clinics, the situation is going to get worse, Edwards said.

PeaceHealth expects the new hospital will break even in three years and be profitable after that. Profits generated locally will be invested in on-island medical care, including equipment.

While the contract refers to the proposed hospital as a "Combined Clinic and Hospital Facility," proponents say it will actually be an "integrated medical center" because it will integrate a variety of services at one site: inpatient care, outpatient care, diagnostic services, and emergency medical care.

Inpatient surgeries will still be referred to mainland hospitals. Heart attack and stroke patients will still be taken to mainland hospitals. Babies will still be born on the mainland.

Services that will be provided on-island: Outpatient surgery, chemotherapy, cardiology, diagnostics and imaging, gastroenterology, oncology, rheumatology, and treatment for body injuries and neurological degenerative disorders.

Patients will stay in the integrated medical center for observation and short-term care after surgeries. There will be 10 hospital beds.

The medical center will be about 42,242 square feet, including 24,492 square feet of clinic space for doctors and specialists. Inpatient and outpatient space will comprise 14,250 square feet; the emergency department would comprise 3,500 square feet. The staff will grow from 25.3 full-time equivalents to 44.5.

San Juan County Public Hospital District No. 1 and Peace Health contract

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