Meetings of a PeaceHealth-appointed governing board for a proposed hospital on San Juan Island could be subject to the state’s Open Public Meetings Act and the Public Records Act, according to an analysis by the state Attorney General’s open government ombudsman.

Tim Ford, assistant attorney general for government accountability, said the governing board could be considered a public agency, rather than just an arm of the non-profit PeaceHealth system, depending on how it was created, how much tax funding it will receive, and if it performs a governmental function.

The San Juan County Public Hospital Commission, which operates Inter Island Medical Center and San Juan EMS, voted 5-0 March 18 to give PeaceHealth authority to build and operate a hospital on San Juan Island for 50 years. The commission assigned governance of the hospital to a governing board to be appointed by PeaceHealth; the governing board takes over when the hospital opens and Inter Island Medical Center closes. PeaceHealth would receive more than $1 million a year — about $60 million over the life of the contract — in local property tax revenues to subsidize health care.

PeaceHealth officials have said meetings of the governing board would not have to be public, as hospital district commission meetings are now, because PeaceHealth is a non-profit. The governing board would provide semi-annual reports to the hospital district commission.

Former county assessor Paul Dossett has asked that the PeaceHealth-appointed governing board include a member of the hospital district commission and that the meetings be public, because local property taxes will subsidize medical care at the hospital.

Prosecuting Attorney Randy Gaylord said the PeaceHealth governing board could be subject to the Open Public Meetings Act if it is “doing the work of the public agency. Then it would seem they are a quasi-public agency.”

The state’s Open Public Meetings Act declares “All meetings of the governing body of a public agency shall be open and public and all persons shall be permitted to attend any meeting of the governing body of a public agency …” The act includes in its definition of a public agency “Any subagency of a public agency which is created by or pursuant to statute, ordinance, or other legislative act, including but not limited to planning commissions, library or park boards, commissions, and agencies …”

The state’s Public Records Act applies to “every county, city, town, municipal corporation, quasi-municipal corporation, or special purpose district, or any office, department, division, bureau, board, commission, or agency thereof, or other local public agency.”

Ford said the state Supreme Court applies a four-part test to determine whether an agency is subject to the state’s Open Public Meetings Act and the Public Records Act:

— Whether the entity is performing a governmental function.
— Whether the funding of the entity is governmental.
— The extent of governmental involvement or control.
— Whether the entity was created by private or legislative action.

The state Supreme Court has ruled in the past that agencies that receive public funds are quasi-public agencies. In Telford v. Thurston County Board of Commissioners, in 1999, the court ruled that although the Washington Association of Counties and the Washington Association of County Officials have some characteristics of private entities, they were quasi-public agencies because they serve a public purpose, are publicly funded, and were created by government officials.

In Clarke v. Tri-Cities Animal Care & Control Shelter, in 2008, the court determined that a private business providing animal control services under contract to three cities was subject to the state Public Records Act. The cities had, by interlocal agreement, formed an animal control agency that contracted with the private business to provide animal control services. Some of the employees of the business took oaths as animal control officers. The funding was primarily governmental, and the business had to follow some procedures set out by the interlocal member agencies.

Jim Barnhart, CEO of PeaceHealth’s Suislaw Region in Oregon, has been appointed by PeaceHealth to lead the planning and development of the proposed hospital on San Juan Island. He said the open public meetings and public records requirements are “something we would take a look at” and that “we, of course, would abide by any requirements that exist.”

“We function as private non-profit boards in communities today. We engage and connect with our community and want to relate with all people. Traditionally, we have had outstanding relationships with officials and organizations, private and non-profit alike,” he said.

In the transition from a publicly-elected hospital district commission to a PeaceHealth-appointed governing board, Barnhart said islanders would notice no changes “other than there would not be a public election.” He said board members would be accessible to — and responsible to — the public. Public communication with the board is encouraged, he said.

“It’s beholden upon the organization to be responsive. That is our practice.”

Pursuing certificate of need
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.

According to the contract approved in March, 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.

But the hospital project has many steps to take before construction begins.

PeaceHealth has requested a certificate of need from the state, certifying that a hospital is needed on the island. Upon receiving the certificate of need, the San Juan Community Hospital Committee — which advocated for the hospital — 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. 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 district commission will continue to be directly responsible for the operation of San Juan Island EMS.

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 will 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.

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.

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.

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.

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.