The meeting was called to order at 6:10 p.m. by Fred Lau.

Present: Fred Lau    Julie Derry

Ingrid Avril    Lorna Olson

Wendy Lefton    Steve VanWagoner

Ron Alderfer    Kellie Blue

Excused: Rick Eckert

Also Present: Charles Franz, CEO

Charlie Button, CFO

David Green, SAB Chairman

Tom Walpole, Human Resources Director

Robbie Coffey, RN, Acute Care

Mark Talley, Controller/Purchasing Manager

Mike McCarthy, Potential Board Member

Marsha Kinney, Homer Secretarial Services

Mr. Franz requested adding Operating Budget as Item C, and Committee Assignments as Item D, under NEW BUSINESS.

The agenda was approved as amended.

There were no comments from the audience.

The minutes were approved as submitted.

Mr. Franz requested a motion from the BOD to forward the capital budget to the SAB for approval. He said the budget is fairly consistent to what it has been in the past in terms of the same amount of money allocated to capital equipment. The one major change is the addition of the hospital information system at a cost of $1.2 million. This will be a replacement of the entire information system for the hospital, and will also be capable of integrating medical records, order entry and physician and nursing notes. Mr. Franz said the staff and the physicians were asked to assign a priority to each component of the information system. This information will then be used to develop the hospital’s request for proposal to be sent to vendors. He said based on their initial analysis they have narrowed it down to five top vendors to be contacted.

Mr. Button said there are $2.6 million in expenditures with only $1.7 million for tax revenue this year. He then reviewed the recommended three options to cover the gap of approximately $940,000.

Option 1: Keep mil rate at 1.75 mils and use this year’s current operating funds from funded depreciation and projected gain from operations.

Option 2: Request the Borough to raise the mil rate to 2 mills. By doing this it would not require using as much of the operating funds.

Option 3: Keep mil rate at 1.75 mills and finance the new information system over five years, which would also not reduce operating funds as much.

Mr. Lau said it was his understanding they were recommending Option 1, to which Mr. Button agreed. Since they are looking at bonded indebtedness for the hospital’s construction project, Mr. Franz said they are recommending Option 1 so there would not be an increase in other debt. He added there is enough in funded depreciation this year and it is consistent with the direction given by the Borough Finance Director who did not want the hospital to build up a significant reserve. Mr. Green said the SAB Finance Committee was also in favor of Option 1 for the reasons stated. Ms. Derry said she was not clear when making the motion it should be based on Option 1. Mr. Lau said they would amend the motion. Ms. Lefton voiced her concern on spending over $1 million on a system, which may be obsolete in five years, and would like to be certain this has been thoroughly researched. Mr. Button said the systems they have been considering are all comparable, and one system, MEDITEC, is in several hospitals in the state. Mr. Eckert said as long as they obtain software upgrades it should have a lifespan longer than five years.

Mr. Lau then asked for a roll call vote on the main motion as amended.

Mr. Franz said Mr. Turkington was a trustee and asked if they would like to appoint another member to this position since he has left the BOD. He said the trustees’ meet twice during the year to look at the asset allocation for investment of the Pension Plan assets. Currently the three trustees are Mr. Lau, Mr. Button and Mr. Turkington, with Mr. Franz as the Plan administrator. Mr. VanWagoner volunteered to replace Mr. Turkington as a trustee. Mr. Franz said he would provide Mr. VanWagoner with a copy of the material for him to review.

Operating Budget

Mr. Lau said during the Finance Committee meeting the committee members had decided to recommend the budget be passed but some of the BOD members had not received a copy of the budget to review. They then provided copies to those who did not receive them and asked Mr. Button to go over some of the areas.

Mr. Button said patient services revenue was expected to go down because they have been extremely busy during the last seven months but do not expect this to continue. Mr. Button added a 3% increase in charges has been included in the budget and they expect outpatient revenue to go up due to an increase in the physical therapy and respiratory areas. LTC occupancy is not expected to drop but they are anticipating a decline in meds because of swing beds. He said total patient revenue is expected to go down $296,000.

Mr. Button said deductions from revenue are not expected to change very much but are projected to decrease by $95,000. The primary reason for the decline is due to several administrative adjustments throughout the year and also a significant reduction of Workman’s Comp claims. He said the total net revenue is projected to decline $246,000.

Mr. Button then went over expenses, which included salaries budgeted with an increase of 3%. He said at this point in time they do not know how contract negotiations will go and may have to consider a budget revision. Other expenses were employee benefits, with an increase of 3.78%, supplies increased 2%, utilities will stay the same, and insurance increased 16%. Professional fees were budgeted with a decline of 2% due to anticipating less contract labor, and dues are projected to decrease 8% because of obtaining resources for free on the Internet. Travel is showing an increase of 81% but in reality this went from $209,000 in 2001 to $241,000. Mr. Button added they are anticipating a decline in leasing and an increase of 8% for bad debt. Total operating expenses are increasing 4.4%, showing a loss from operations of $260,000. This loss translates to a break even from operations funding 85% of depreciation.

Mr. Button said in regard to miscellaneous income the service area general property taxes were budgeted at1.75 mils, investment income will decline since SPH no longer has as much money at the Borough due to the hospital expansion, and state funding is also declining. He said net income, including service are funds, will be $1.5 million.

Mr. Lau recommended all BOD members take a detailed look at the budget before the next meeting.

Committee Assignments

Mr. Lau recommended having three committees, which would consist of the Strategic Planning Committee, the Finance Committee and establishing a Governance Committee. The Governance Committee would cover Nominations, Policies and Procedures, Education, Sublease and Operating Agreement, Bylaws, Quality Improvement, and Board Evaluation, and they could possibly handle some of these topics as sub committees. He suggested each committee provide a short description of their purpose so members are aware of what responsibilities each committee has. Mr. Lau asked the members to call him if they are interested in serving on any of these committees. He also mentioned Mr. Turkington was on the Finance Committee, and since he is no longer on the BOD, they will need another member. Ms. Lefton volunteered to be on the committee.

Ms. Blue mentioned she is a member of the Finance Committee but with her work schedule has not been able to attend some of the Monday meetings, and asked if it might be possible to change the meetings to be held on Tuesday. Mr. Lau said they would check with the other members.

Mr. Franz referred to the copy of the Student Loan Program Proposal in the members’ packets and felt they have addressed the various concerns they had regarding this program. He said money is available from the following un-obligated funds:

An unanticipated payment from Medicare for the fiscal year 2001 swing bed rate.

An unanticipated payment from Medicare for the fiscal year 2001 CRNA pass-through allowance.

The pro-share payment from Medicaid.

The disproportionate share payment from Alaska Medicaid.

Mr. Franz said funds available for the program equal approximately $194,000. He felt it would provide good benefits for the hospital in the future and asked the Board for approval.

Mr. Lau then read the recommendation, which was as follows:

Ms. Lefton asked how they would handle the situation if an individual qualifies, is receiving the education for a certain job, and another person applies for this position. Mr. Franz said he felt if there was a temporary overstaffing situation it would not last very long because of the turnover rate in some of the positions. He added it might also be necessary for them to inform the individual there is an employee returning from training and this may only be a temporary situation.

Ms. Blue asked if prospective students might obtain some of their prerequisite training at the local branch of Kenai Peninsula College. Mr. Franz said they are able to do this and next fall will have access to a distance delivery program, from Weber State in Utah, for a LPN ladder program. This program will enable the student to obtain their LPN certification and the next year their RN certification. He added they would be working with the college with assisting students in applying for any educational assistance available through college sources.

Mr. VanWagoner asked if the students would be able to do their clinical work at SPH. Mr. Franz said with the Weber State program they plan for them to do some of their clinical work at the hospital and Central Peninsula Hospital. He added clinical experience needed in areas SPH does not provide would need to be done in Anchorage.

Mr. Eckert asked what the purpose was in setting the funds aside in a separate account. Mr. Franz said they felt this would be best for tracking purposes.

Ms. Lefton asked how the individuals who applied would be chosen for the program. Mr. Franz said their application would be submitted to the Employment Improvement Committee, which consists of four union members and four management members, to be reviewed. They would then make their recommendation to Mr. Walpole, Director of Human Resources, who would make the final selection.

Ms. Derry asked if they felt it was necessary to still provide health insurance while in a training program. Mr. Franz said most individuals have families and this would be a very important benefit they would not want to give up. She then mentioned she was somewhat concerned about the loan forgiveness being only three years. Mr. Franz said he also felt it should be a longer time period, and suggested two years for each year of education, but some of the managers felt this was too long.

Ms. Derry asked if they had any projections on how much the hospital would be able to add to the fund yearly. Mr. Franz said if the funds were obligated this year they would then come to the BOD with a budget proposal next year, and felt this will depend on the amount of interest they receive in this program.

Mr. Green felt if funds were short for this program in future budgets, and they would need to incorporate additional monies into the operating budget, the SAB would look favorably on approving this.

RFP for Architect Services – Proposal Evaluation Committee

Mr. Franz said they met with several architectural firms interested in bidding on the hospital ’s request for assistance on the Master Plan. The bids were due on March 1st but after some discussion the Borough decided to move the date to March 15th to allow the firms more time to respond. After receiving the proposals they will need to evaluate them and it was suggested this responsibility be delegated to the Strategic Planning Committee since they have been involved with this process. Mr. Lau asked if there were any objections to the committee reviewing the proposals. There were no objections.

Critical Access Hospital

Mr. Franz referred to a copy of the report included in the members’ packets, which had been prepared by Mr. Button, and asked if the members had any questions. There were no questions.

Strategic Plan Follow-up

Mr. Franz mentioned two of the major goals the Strategic Planning Committee is currently working on.

There has been a change in the timeline for the Master Plan development due to the delay in getting the request for proposals out, and the Borough extending the response time from the architectural firms for bids. The date for the development of the Master Plan was originally set for May 31, 2002, and will now be close to the end of September.

There has been a change in the timeline for the evaluation of the computer system to be completed by July, 2002, instead of the planned date of July, 2003.

Mr. Lau requested an update of these goals at the next meeting.

SAB Finance Committee Meeting,    03/05/02 12:00 p.m.,    SPH Conference Room 1

SAB Regular Meeting,    03/07/02 6:00 p.m.,     SPH Conference Rooms

BOD Finance Committee Meeting,    03/25/02 12:00 p.m.,     SPH Conference Room 1

Regular BOD Meeting,    03/27/02 6:00 p.m.,    SPH Conference Rooms

Mr. Lau said they would look at possibly moving the Finance Committee Meeting to Tuesdays to enable Ms. Blue to attend.

There was no one from the Medical Staff present this evening.

Mr. Franz reported the Medical Staff passed a motion at their last meeting for a completely smoke free campus. Mr. Lau added they have made the recommendation to the BOD to adopt the policy of a smoke free campus and asked how they should handle this. Mr. Franz said since this is a work condition it should be discussed during contract negotiations. Mr. Lau felt this was suggested because people are not utilizing the outside smoking area and are standing near the entry areas. Mr. Franz said he felt the staff is good about complying and it is mainly patients who are standing close to entries instead of going further out into appropriate smoking areas.

Mr. Button said the two areas they mainly focused on at their meeting were the budget and the monthly financials. He asked the members to advise him if they would like to have any changes to the layout for the monthly financials, which might make them easier to read. The month of January was a very strong month financially but there were also some significant expenses as well, ending with a lose from operations of $102,000. Included in the expenses were approximately $266,000 relating to one-time expenses. Year to date the hospital is looking good with a $529,000 gain from operations.

Mr. Green said he did not have very much to report since the SAB did not have a quorum at the last meeting. He mentioned he is preparing an E-mail update on various items, such as the land issues, and would be happy to forward this on to any of the BOD members who have an E-mail address.

Mr. Lau provided the members with a written report and said in the future his reports will be included in their mailed out packets. He said it has been an interesting month attending meetings and he was very impressed with the staff. He has toured the hospital and mentioned there is some remodeling taking place at the nurses’ station and by the ER. He suggested the other members also take a tour if they have not done so recently.

Mr. Green asked if the fan has been replace in the LTC kitchen. Mr. Franz said it is on a list of things to do as soon as the snow is gone and they can do the necessary work on the roof.

Mr. Green said he forgot to inform the BOD during his report that the SAB has found a potential candidate to fill their vacancy. He is Jay Kennelty who is the pharmacist at Ulmer’s.

Mr. Lau apologized for missing the joint meeting.

Mr. Franz referred to a sample of the type of compensation report provided to all hospital employees with their last paycheck. This will give each of them an idea of what it costs to have them as an employee. Frequently they look at their base salary rate and feel they are not making as much as they should be. He said they received some good feedback from some employees along with some who felt they were trying to manipulate things. They plan to do this on an annual basis to keep staff informed on what their benefits are worth. Mr. Franz thanked Mr. Button and his staff for all their hard work preparing these.

Mr. Franz informed the members there would be a Chili Cook-off tomorrow, between 11:00 a.m. and 1:00 p.m., and invited the members to attend and help with the judging.

Mr. Franz said Mr. Walpole, Director of Human Resources, has complied an employee opinion survey similar to the one done a few years ago and will be distributing this to employees in the next month.

Mr. Franz introduced Mr. Mark Talley, who is the hospital’s accounting manager and manager of medical materials. Mr. Franz said he received a call from Mr. Tom Davis, a prior CFO at SPH and currently the CEO of the Chugiak Senior Citizen’s Center, informing him they had purchased an Army surplus hospital and had items SPH might be interested in. He said Mr. Talley and Ms. Vicky Tesar, the hospital’s OR scrub tech, visited the Army surplus hospital and returned with roughly $100,000 worth of surgical instruments for a $3,000 donation to the Senior Citizens Center. They will now inventory the instruments and price them out to obtain their actual value. Mr. Franz thanked Mr. Talley and Ms. Tesar for their time and efforts.

Mr. Franz said SPH is facing a potential 15% reduction in reimbursement for home health services. He said this is part of the Balanced Budget Act of 2000 and the implementation of it has been delayed several times. Currently Congress is trying to stop this because many small home health agencies around the nation are struggling. He said since the hospital is barely breaking even now if it was faced with the reduction this would be a significant hit. Mr. Franz suggested if the members have an opportunity to communicate with Alaska’s representatives in Washington DC, they might what to ask them to take whatever action they can to help in this matter. He said if they introduce a bill he would forward the bill number to the members.

Mr. Green asked if they held the problem solving session to pave the way for labor negotiations in the future. Mr. Franz said they did and Mr. Lau reported on it in his written report. He felt they had a good training session, with Mr. Jeff Clark and both the management team and the union team, and felt it would be a challenge to use the interested based approach as apposed to a positional approach.

Mr. VanWagoner asked if the doctors have received the list of drugs they have been requesting for four years. Mr. Franz said they now have the list of drugs but they are still working on a formulary for the physicians.

Ms. Derry said since the conference room was not available the last meeting had been cancelled. She added she will not be able to attend the next meeting and asked if anyone else would like to attend. Ms. Blue volunteered to attend the next QI meeting.

Ms. Derry provided a draft report of an overview of statistics, which QI monitors. Mr. Franz asked if this type of draft would provide the members the information they had requested regarding quality of care. Mr. Green said he was happy with the format but suggested it would be helpful to be able to compare the number of medication errors per total number of prescriptions written or dispensed. He also suggested the same for residential fall studies.

Ms. Lefton asked if they would also be able to identify if there is a particular area this is happening in to see if there might be a pattern. Mr. Franz said they were able to do this and also the department managers’ look at staff to see if the errors are due to an individual. He added they have the same approach with the resident falls.

Mr. Franz then asked if the members would like to have a more detailed report then what the draft shows. Ms. Derry felt it would be a good idea since she is the only member of the BOD attending the QI meetings.

Ms. Blue asked if there might be a way to correlate overtime with errors. Mr. Franz felt they would be able to pull this information from two data sources.

Ms. Lefton asked if the report indicated a particular area that might need to be addressed. Mr. Franz felt an area they might continue to work on would be resident falls and inpatient falls.

Ms. Robbie Coffey mentioned the hospital recently purchased eight new beds, which have the capability of setting off an alarm as soon as the patient attempts to get up. She said this has helped the nurses very much. She added it seemed medication errors happened more when things were slow.

Ms. Coffey asked if the BOD could do anything to help in getting an RN program in Homer or Soldotna/Kenai sooner then planned. Kenai is expected to have this program in 2003. She felt it would be impossible to go from a LPN to a RN in two years.

Ms. Coffey said there are positions open, they are still putting in overtime, but thanked Mr. Franz for travelers who have come in to assist staff. She added travelers are costly and nurses’ wages at SPH are low compared to Providence. She said she received a letter from a nurse who wanted to move back to Alaska, which said she received an offer from Providence for $28.00 per hour base pay, $2.00 more for evenings, and $2.00 more for weekends. If she were to come back to SPH she would only receive $23.00 per hour.

Mr. Lau felt these issues would be discussed during negotiations and thanked Ms. Coffey for her comments. He said since she mentioned at the last meeting she did not see current positions available posted on the Internet he noticed they are now listed. She said the computer she was using did not have the capability to search for this information and the systems staff has now installed it.

Ms. Blue introduced Mr. Michael McCarthy who is observing the meeting this evening in hopes he will consider a position on the Board.

Mr. McCarthy informed the members he is a retired Kodiak police officer with experience on the North Slope, Oregon and private criminal justice. He said he is also a registered geologist in the state of Oregon. Mr. McCarthy said he was quite pleased to see the efficiency of the Board’s meeting process versus what he sees with the city. He said he has been meeting with the city for over a year on a geologic issue, which is a hazard for the area. Mr. McCarthy said the Borough is interested but cannot move until the City takes the first step. He mentioned he has a daughter who is a RN in Portland, Oregon, and another daughter who is training to become a nurse midwife who would like to come back to Alaska at some point. He said they moved to Homer in 1997 and prior to that he had been asked to be on the Board at the Kodiak hospital.

Mr. Walpole said one year ago he attended his first Board meeting as an employee.

Ms. Blue thanked Mr. Lau for serving as Board President.

Ms. Derry said she wanted to go on record regarding how disheartened she was with an apparent lack of cooperation among the surgeons to insure surgery is covered. She felt the problem might continue but hopes it will not. Ms. Derry urged the surgery staff to return to cooperating as a team.

Ms. Lefton said she enjoyed her first meeting with Mr. Lau as President.

Mr. VanWagoner said he missed the meeting with election of officers and congratulated the members on their choice of officers. He also congratulated Mr. Lau, was impressed with what he saw this evening, and felt he will do an excellent job as President.

Ms. Avril thanked Mr. Lau and said she felt they were off to a great start. She also thanked Robbie for her input and felt it was very helpful.

Mr. Eckert dittoed Ms. Avril’s comments.

Mr. VanWagoner added he knew Mr. McCarthy and felt he would make an excellent contribution to the Board.

There was no executive session this evening.