ITEM TITLE:
Approval of Amendment #2 to the Hospital Management and Operating Agreement Between the City of Valdez and Providence Health Services
SUBMITTED BY: Marc Detter, City Manager
FISCAL NOTES:
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Unencumbered Balance: Click here to enter text.
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RECOMMENDATION:
Approve 2nd amendment to Management and Operating Agreement between City of Valdez and Providence Health Services
SUMMARY STATEMENT:
The City of Valdez entered into an agreement with Providence Health Services-Washington, DBA Providence Health Services Alaska, effective January 1, 2015 and amended such agreement January 1, 2016 for the purpose of authorizing Providence Health Services to manage and operate the City of Valdez Hospital for a five year period. The management and operating Agreement expires December 31, 2019.
City staff is proposing that the City Council approve a second amendment to the management and operating agreement between the City and Providence extending continued operation and management by Providence of the hospital for an additional 5 years (until December 31, 2024).
The primary addition/alteration to the management and operating agreement between the City and Providence is further clarification and detail related to Providence’s communication with the City on alterations to the hospital structure and the applicability of State of Alaska regulations related to projects utilizing public funds and specifically the applicability of the Little Davis-Bacon Act as set forth in Alaska Statutes Title 36.
The unique agreement between the City and Providence has created outstanding health care services for the citizens of Valdez. The agreement and City Code essentially stipulates that ordinary operational expenses related to the hospital are not subject to procurement requirements under City Code. However, the use of public funds to make major alterations and additions to hospital fall under City procurement (if applicable) requirements.
The critical component of determining when major alterations and additions are subject to City procurement requirements will be frequent communication between Providence facilities and maintenance staff and City capital facilities staff. The past 5 years has seen solid communication between both parties and the City and Providence want to emphasize the need to maintain vigilance on this important issue.
The stewardship of the Hospital finances by Providence has been outstanding. The 2014 City of Valdez Comprehensive Annual Financial Report (CAFR) showed approximately $13.9 million in revenue and approximately $13.4 million in expenditures, resulting in a 500K positive net change in fund balance, leaving an overall fund balance of approximately $8.7 million dollars for the hospital fund. The 2018 City of Valdez Comprehensive Annual Financial Report (CAFR) depicts $15 million in revenue and $14.5 million in expenditures, equating to a 500K positive net change in fund balance, leaving of an overall fund balance of just over $10 million for the hospital fund. Providence projects the final numbers for the hospital will show a similar net positive change in fund balance for 2019.
It is difficult to explain and emphasize the unique financial success of the Valdez Hospital in the current health care environment. Rural hospitals across America are closing or relying upon more subsidies from local government units. The entire Valdez healthcare system requires minimal support from local government as a percentage of overall health care expenditures for the entire community.
The City Attorney has reviewed and made slight alterations to the amendment to the management and operating agreement between the City and Providence. Providence will present an overall picture of hospital operations during the work session prior to the regular Council meeting.