More than 110 people packed into Mullis Community Senior Center June 11, many to raise questions and voice concerns over the issue of building a proposed $30 million hospital on San Juan Island.

Commissioners from the San Juan Island Hospital District sat passively while Charlie Anderson and Tom Cable, co-chairmen of the San Juan Community Hospital Committee, made a coordinated presentation on the need for a hospital.

Representatives of PeaceHealth — which proposes operating and helping to fund construction of a new hospital — were also in attendance, including Senior Vice President Peter Adler.

PeaceHealth, a non-profit corporation, operates hospitals in small to medium-sized communities in Alaska, Oregon and Washington, including St. Joseph’s Hospital in Bellingham.

Comments ranged from general support for a hospital that would meet the medical needs of a changing community, to a reluctant “I pay enough taxes as it is” response from others.

The proposal calls for a 42,000-square-foot integrated medical clinic, with EMS services, 10 beds, two operating rooms and equipment necessary for islanders to stay on-island for tests and procedures for which they now go off-island.

The cost of the proposed hospital is $29.8 million, of which taxpayers would pay $12.8 million through a general obligation bond, PeaceHealth would pay $7 million and the San Juan Community Hospital Committee would raise $10 million in private philanthropic donations.

The hospital district is a taxing district; it raises about $1.4 million annually through a property tax levy. The district raises other operating revenue through patient fees and reimbursements.

The district operates Inter Island Medical Center, which cannot provide inpatient round-the-clock care. In addition, medical costs are reimbursed by Medicare and other insurance plans at a medical clinic rate.

Like the town and county, the district can issue bonds through a vote of its elected commissioners. In other words, a vote by the larger community is not required for the project to move forward; the commissioners can vote on a bond issue themselves, according to the state Attorney General’s office.

The informational meeting informed the community and board commissioners about details found in the recently released feasibility study. The next step in the process is whether the hospital district commissioners will vote to issue a non-binding letter of intent, which will allow proponents to continue exploring the feasibility of a new hospital — a process that would answer the tough detailed questions raised June 11.

The commissioners plan to vote on the letter of intent June 25, 5:30 p.m. in the Frank Wilson EMS Building on Spring Street. The meeting is open to the public.

If the letter of intent is issued, the “due diligence” process could take up to six months to complete before an application for a certificate of need is submitted to the state.

Support for a new hospital came from different parts of the community, ranging from young moms facing the prospect of going off-island with their children for medical appointments, to retirees needing age-related medical care that they would prefer not to leave the island to receive.

Proponents say the financial sustainability of a hospital centers around its ability to provide many procedures for which islanders currently have to leave the island: Diagnostic imaging, chemotherapy and outpatient specialist care.

Concerns raised over building the new hospital fit loosely into two broad categories: financial and staffing.

Former county assessor Paul Dossett, a long-time islander, voiced his concern about the hospital district’s financial future. He raised the issue of paying down the bond which would likely be issued by the hospital district to pay its estimated $12.8 million contribution to hospital construction costs. 

“They can pay that (debt service) out of the regular taxes that they collect from you and I. The town does it and the county’s done it for years,” Dossett said.

A taxpayer-approved property tax increase expires in 2015. That increase bumped the amount of tax revenue the district could collect from $1.2 million to $1.4 million.

Dossett’s concern centered around what’s left over after paying the estimated $950,000 annually on the bond after the increase — also called a levy lift — expires.

“The expiration drops down their levy capacity down to a ($1.2 million). I’d have to look at it. By the time you take $950,000 out of it, it only leaves $285,000 to operate their district.”

Dossett full anticipates the levy lift to be reinstated, and that’s where he figures the hospital district will ask voters for more money than they currently do.

“They always ask for more,” Dossett said. “That will be a tax increase.”

The second concern raised by several doctors centered around the difficulty the hospital district has in recruiting and retaining qualified doctors to staff 24/7 emergency care. The hospital district has had a vacancy on its staff since the unexpected passing of Dr. Marcia Zakarison 16 months ago. Complicating matters, Dr. Greg Moran is scheduled to leave the clinic’s staff in July.

According to Dr. Jan Smulovitz, a retired endocrinologist, the crux of the issue is how PeaceHealth structures its contracts with physicians. Smulovitz spent 28 years working closely with PeaceHealth in the Eugene, Ore., area and has seen first-hand how the company pays its staff physicians.

Smulovitz’s concerns over recruitment and retention were echoed by two other retired local doctors, Dr. John Geyman and Dr. Trudy Dallas.

The persistent retention problem, according to Smulovitz, stems from if and when PeaceHealth moves its doctors off of a salary and into a fee-for-service model, paying doctors based on the amount of patients they see. In a rural area, that poses problems for local doctors and frequently results in pay cuts for those who choose to live and work here.

“If they’re salaried employees, then it doesn’t matter how many patients they see and how much time they’re coming here. If they still just get paid, that’s fine. But for how long can they do that?” Smulovitz asked.

Smulovitz said that in his past dealings with PeaceHealth, it’s been PeaceHealth’s practice to place physicians on a two-year salaried contract and, at some point thereafter, move them into a more fee-for-service based model.

Whether that would be the case here is speculation and would be something determined after a letter of intent is issued.

“Our reimbursement is cost-based, so we have the ability to do salary and benefits that will be covered by reimbursement,” said Nancy Steiger, PeaceHealth CEO and chief mission officer of the Whatcom region. Steiger said recruiting would be made easier because the PeaceHealth has more than 130 board-certified physicians.

Steiger’s optimism was echoed by Dr. Denise Jensen, who took an informal poll among 15 of her peers and reported a high degree of interest in a San Juan Island hospital, saying the issue of recruitment would not be as difficult as the more cautious voices suggested.

PeaceHealth’s Adler understood the issue but did not have a definite answer, instead preferring to stay on-message:

“That’s one of the many pieces of work that will happen in due diligence,” he said. “We have all models. Remember, we’re in three states and in all kinds of communities. One of the many beauties of PeaceHealth is that we’re able to adjust to the needs of the community.”

According to Adler, the terms of any future physician contracts would not be known, even to hospital district commissioners.

“If physicians are employees of PeaceHealth, then no, it’s not public information.” he said.