New Friday Harbor hospital would require $12.8M taxpayer bond

Building a new community hospital in Friday Harbor would cost $29.8 million — $10 million of which would be raised through philanthropy, $7 million from PeaceHealth and $12.8 million from a bond backed by the island’s property tax-supported hospital district.

Proponents say it would break even by fifth year

Building a new community hospital in Friday Harbor would cost $29.8 million — $10 million of which would be raised through philanthropy, $7 million from PeaceHealth and $12.8 million from a bond backed by the island’s property tax-supported hospital district.

The hospital — it’s now being called an “integrated medical center” — would lose $257,000 the first year, would break even the third year and would generate a $183,417 profit by the fifth year.

There would reportedly be no increase in property taxes; PeaceHealth, a non-profit which owns St. Joseph’s Hospital as well as other hospitals in Alaska, Oregon and Washington, would assume all financial risk as well as management responsibilities. Any profits would be used to defray the cost of providing medical care to patients who can’t afford care. Medical center employees would become PeaceHealth employees; San Juan EMS would continue to report to the hospital district commission.

Data regarding the financial viability and management of the proposed hospital were unveiled to islanders who packed Mullis Community Senior Center May 28. The presentation was made by members of the San Juan Community Hospital Committee, which advocates building a new hospital; and PeaceHealth vice president Peter Adler. The presentation was made during the regular meeting of the San Juan Public Hospital District Commission, which oversees Inter Island Medical Center and San Juan EMS.

The viability was assessed by 25 people on several committees — they studied market and demographics, clinical services and staffing, facilities development, financial modeling, and PeaceHealth integration and synergies. The study was funded by the community hospital committee and PeaceHealth.

Proponents say the current medical center building is aging and is too small to accommodate islanders’ needs. They say a hospital could provide many medical services for which islanders must now travel to the mainland. IIMC Administrator Beth Gieger has said that a hospital would receive greater reimbursement for services from Medicare than the current medical center, which is classified as a clinic.

The next step: The community hospital committee has asked the commission to approve a non-binding letter of intent, which would clear the way for the committee and PeaceHealth to continue studying the feasibility of building a hospital. Proponents hope to have regulatory approval by the end of this year, begin construction by the end of 2009, and open in early 2012.

The hospital district commission will take public input on the hospital proposal, and discuss the letter of intent, on June 11, 5:30 p.m., in Mullis Community Senior Center.

Tom Cable, chairman of the community hospital committee, said the current medical center is “dramatically overloaded.” He garnered some laughs with his reference to the “mammography closet,” the former closet that was converted into a space for mammograms. He talked about the burden of ferry travel to get to the mainland for treatment that could be done on-island. He said 30 islanders a month are referred to mainland hospitals for colonoscopies. “I’m sure most of us would rather prep at home than at the Motel 6,” he said.

The committee determined services that should be provided here based on a study of records of services that have been provided to islanders at mainland hospitals.

Cable said committee members visited seven rural hospitals in Washington to determine what it would take to operate a successful hospital on the island. The committee visited Swedish Hospital, University of Washington Medical Center and Virginia Mason Medical Center, but was most impressed with PeaceHealth’s philosophy and track record.

Cable said PeaceHealth led Cottage Grove Community Hospital in Oregon out of bankruptcy. He said the company is strong financially and has “tremendous” purchasing power.

Still, the proposal raised questions that hospital district officials and proponents said could not yet be answered.

This much is known:

The medical center would be built on a 10- to 11-acre site yet to be acquired. The land purchase would be made with proceeds from the sale of the Inter Island Medical Center site. Construction would begin in late 2009 with the grand opening in early 2012.

Inpatient surgery would not be performed at the new medical center. Heart attack and stroke patients would still be taken to mainland hospitals. Babies would still be born on the mainland. Services that would be provided: Outpatient surgery, chemotherapy, cardiology, diagnostics and imaging, gastroenterology, oncology, rheumatology, and treatment for body injuries and neurological degenerative disorders. Patients could stay in the medical center for observation and short-term care after surgeries. There would 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, in-house and visiting. That’s roughly two and half times larger than the current clinic, Anderson said. Inpatient and outpatient space would comprise 14,250 square feet; the emergency department would comprise 3,500 square feet. The staff would grow from 25.3 full-time equivalents to 44.5 FTEs.

The medical center would be governed by a local governing board. How the board members would be selected has not been determined. The current hospital district commission’s authority regarding medical center operations has not been determined.

Peter Adler, PeaceHealth’s senior vice president for strategy, innovation and system development, said the hospital — like other PeaceHealth hospitals — take all patients regardless of ability to pay.

“We don’t think about what we do as buildings and facilities,” he said.

Some islanders were skeptical that the medical center would generate enough revenue to pay for itself without a property tax increase; the hospital district depends on about $1.4 million a year in property tax revenue and the rest in fees and reimbursements.

“I can’t see how it can be done without more tax dollars coming from our pockets — and I have fewer dollars in those pockets,” islander Jan Osborn said.

Dr. John Geyman, a retired U.W. physician and former hospital commissioner, said he was skeptical “for a bunch of reasons.” He doubted that the need would be great enough to make it financially viable for specialists to visit the island.

Dr. Jan Smulovitz said he had that experience as a private-practice endocrinologist in Florence, Ore. Specialists found that they could not afford to travel to the nearest PeaceHealth hospital “for three patients.” He said PeaceHealth had trouble recruiting physicians.

Dr. George Foster, a retired physician in Eugene, Ore., had a more positive experience with PeaceHealth. “I found the organization to be one of quality, one of compassion. I have nothing but positive things to say.” He added that people who couldn’t afford to pay were never turned away.

Frank Brame asked the hospital district to explore using Islands Convalescent Center, next door to Inter Island Medical Center, for overnight care.

The Journal is checking with the county Prosecuting Attorney’s office and the Secretary of State’s office to determine whether the hospital project and bond measure require a public vote.

But after the May 28 meeting, islander Dick Babbitt said he felt the project should be on the ballot regardless of whether a public vote is required.

“It should be on the ballot because taxpayers are responsible for it.”


PeaceHealth was founded in 1890 by two members of the Sisters of St. Joseph of Peace; their first care facility was St. Joseph Hospital in Bellingham. In the 1970s, the Sisters formed what is now PeaceHealth to oversee their hospital services.

Medical facilities in the PeaceHealth group include:


— Ketchikan General Hospital


— Center for Medical Education & Research

— Cottage Grove Community Hospital

— Oregon Heart & Vascular Institute

— Peace Harbor Hospital

— PeaceHealth Medical Group

— Sacred Heart Medical Center

— South Lane Medical Group


— Northwest Regional Laboratory

— PeaceHealth Medical Group

— St. John Medical Center

— St. Joseph Hospital