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SEARHC Proposes to Lease SCH Facility and Acquire All Operating Assets and Operations

Sitka –  Today, the SouthEast Alaska Regional Health Consortium (SEARHC) proposed to the Sitka Assembly (Assembly) that SEARHC lease the Sitka Community Hospital (SCH) facility and acquire all of its operating assets and operations to create a sustainable healthcare delivery system for Sitka.

“As community and healthcare leaders in Sitka, we are at a decision point regarding healthcare delivery,” said President and Chief Executive Officer Charles Clement. “With Alaska facing serious fiscal challenges and the 2018 state budget cuts to Medicaid reimbursement, two stand-alone hospitals pose unnecessary risk and uncertainty. By integrating SCH and SEARHC into a single delivery system, the community will be less vulnerable to changes in the healthcare industry and, most importantly, Sitka patients will have increased access to quality primary and specialty care services, decreased wait times and improved facilities.”

Approximately one year ago, SEARHC proposed to the Assembly that it work collaboratively with SCH in developing a shared vision for Sitka – to develop a premier healthcare provider while improving community health through the sustainable provision of a broad array of high-quality clinical services. The yearlong planning effort was guided by a steering committee and led by ECG Management Consultants, whose recommendation in March was for SEARHC and SCH to merge.

“Years of expert community assessments have pointed to a more efficient and effective healthcare delivery system for Sitka, and we have a chance to make that happen now,” urged Clement. “We have an opportunity to realize the shared vision, created by SCH and SEARHC, and to fashion a healthcare delivery system that is not just bigger, but better, for patients, Sitka community residents and all of Southeast Alaska.”

As part of the assurances outlined in the proposal, SEARHC is committed to continuing to provide healthcare services while ensuring all services are available to every patient. SEARHC will also offer employment to all SCH employees in good standing, subject to typical licensure and background checks. The finance terms SEARHC proposed include the following:

  • The City will retain the annual $600,000 to $900,000 in tobacco tax revenue and City capital, previously used to support SCH, for other programs in Sitka;
  • SEARHC will make a cash payment to the City in the form of an upfront purchase price of $6.5 million, adjusted for any working capital items that will be retained by the City;  
  • SEARHC will lease the SCH real estate for $600,000 per year for up to five years totaling $3 million with the City retaining all SCH balance sheet liabilities;  
  • Once the lease is in place, SEARHC will fund the routine capital needs of the existing SCH facility until completion of the replacement facilities; and
  • Once the SCH campus is leased, SEARHC foresees MEH becoming the acute care facility and SCH transforming into primarily a skilled nursing facility.

Looking to the future, SEARHC envisions a new and upgraded medical campus that includes a 25-bed critical access hospital; a medical office building that houses primary care services, specialty clinics and laboratory and radiology services; and a 20-bed skilled nursing facility. SEARHC anticipates construction beginning within three to five years after the finalized transaction is in place.