The meeting was called to order at 6:05 p.m. by Fred Lau.

Present: Fred Lau    Julie Derry

Ingrid Avril    Lorna Olson

Wendy Lefton    Steve VanWagoner

Rick Eckert    Ron Alderfer

Kellie Blue

Also Present: Charles Franz, CEO

David Green, SAB Chairman

Dr. Paul Eneboe, Medical Chief of Staff

Larry Dallas, Director of Support Services

Tom Walpole, Director of Human Resources

Cherish Bee, Office Manager for Dr. McCallum

Dr. Paul Raymond

Gary Billingsley, Insurance Broker, Medical Indemnity Group

Marsha Kinney, Homer Secretarial Services

Mr. Lau requested adding Sublease and Operating Agreement as Item C under NEW BUSINESS, and Governance Committee as Item H under COMMITTEE REPORTS.

The agenda was approved as amended.

There were no comments of the audience.

Mr. Lau mentioned at the end of the last motion on the bottom of page 6 where it read, ". . . . . the University of California at San Diego. A comparable program may be attended at the approval of the Board", should read, ". . . . . the University of California at San Diego or a comparable program may be attended at the approval of the Board."

The minutes were approved as amended.

This item was postponed until Mr. Billingsley’s arrival.

Master Plan Development

Mr. Franz presented an overview of the presentation from Mr. Frank Zilm and felt they had a very productive session with him. He said they went through the various departments and looked at current space, staffing, and program plans and factored in an expected 20% increase in patient days and visits over the next 10 years. They looked at the bed demand for the hospital in order to arrive at the number of beds needed to accommodate patients 95% of the time. After going over the daily census for the last two years it indicated SPH would need 15 beds. Mr. Franz said LTC has been full and the State of Alaska does not want to spend the money to allow licensing additional beds since most of the patients are paid for through Medicaid. They also looked at allowing for additional space for surgery, more storage areas, better space for patient care in ER, and possibly an Alzheimer’s Unit. He said Mr. Zilm also suggested they look at the potential for including the visiting physician’s space as an extension of the ER. In PT they are short on storage space, staff office area, and they would like to possibly add a small exercise pool. Mr. Franz said they would like to provide a more private area in the lab for drug screenings, blood draws, and the blood bank area should be a separate area according to FDA regulations. The imaging areas need to be consolidated, as well as the pharmacy, and both require more storage area. Administration is in fairly good shape but could use more meeting room, classrooms, and information system space. Dietary is in need of more storage area and a better serving area. Laundry needs more work space because of increased workload. Housekeeping needs more storage and staff area. Materials and Management is in need of expanded storage space to prevent Workers Comp and OSHA problems.

After looking at existing space available for each area, they compared it to the lower and higher estimated space, and then looked at the parking spaces associated to each area. The existing square footage for all departments is 71,000 square feet, the low estimate is 77,000 square feet, and the high estimate is 91,000 square feet. When adding in the support departments, such as the power plant, the hospital should be at 98,000 square feet on the low end and 115,000 square feet on the high end, which shows there are significant space shortages. In regard to the parking spaces the hospital currently has 156 parking spaces and 170 spaces are needed.

Mr. Franz said some new programs they have discussed adding is a cardiac rehab area, a patient education library, improved chemotherapy services, and a sleep lab.

Mr. Franz then showed slides from two hospitals, which Mr. Zilm has worked with. These hospitals incorporated as many green areas, windows, music and artwork as they could in order to make the patient as comfortable as possible. They also had comfortable areas for family members where they could access their e-mail and take a shower. Mr. Franz felt Mr. Zilm is very easy to work with, interacts with the staff well, has a feel for arriving at what is needed, and will do a very good job. He added Mr. Zilm would return with suggestions on space layout and meet with them again on November 1st through the 3rd.

Liability Insurance Renewal

Mr. Franz introduced Mr. Gary Billingsly, of Medical Indemnity Group, who has been the insurance broker for the hospital since 1994. He said Mr. Billingsly had requested quotes from seven different insurance companies for renewal of the hospital’s Professional Liability Insurance and Directors and Officers Insurance. With the current insurance market he did not receive positive responses. Mr. Billingsly said there has been a sharp increase in rates with all companies due to the stock market and severe and frequent losses. He then presented his renewal proposals comparing different options with AIG, Executive Risk, and National Union as carriers.

Mr. Billingsly said the annual premium for last year was $23,300. The total premium for this year, including a 10% increase to cover third party harassment and discrimination, would be $34,053, which includes $4,808 for commission and $2,000 for the broker fee.

Mr. Billingsly said in regard to the malpractice coverage he had been requested to also look at an option, which might assist Dr. Hahn and Dr. Raymond with coverage for their ER practice. He added the policy is no longer a pre-paid tail policy, or a mature claims made policy, but is now starting over at first year claims made and will have step rate increases until it matures at the fifth year. The deductible is $25,000 per claim and is not aggregated. If Dr. Hahn and Dr. Raymond are covered for their ER practice the premium for the first $1 million/$3 million, of Professional and General Liability combined, is $107,145. If they are not covered the premium is $95,199. Mr. Billingsly said the umbrella policy carries a total aggregate limit of $5 million/$5 million. Last year the combined premium for coverage was $131,109; if Dr. Hahn and Dr. Raymond were included the premium this year would be $171,177, and if they were not included it would be $159,231. After including the commission, broker fee, surplus lines taxes and placement fee, the total premium on a program most comparable to the expiring policy, which was $146,260 last year, would be $185,810 if the doctors were included, and $175,422 if they are not included.

Ms. Lefton asked if the hospital has no claims during the five years would the premium stay the same or increase. Mr. Billingsly said it is not a five-year policy but has a maturing cycle of five years. This means the first year the premium would be $159,231 and then increases each year with taxes and fees added. The second year would be $298,559, the third year $338,366, the fourth year $378,174, and at maturity would be $398,078. He said this is a sizable increase and is driven by a number of factors such as the current difficult liability market and past losses. From October 12, 1997, until October 12, 2002, SPH has paid a total of $431,109 in premiums and the potential losses equal approximately $490,000. Mr. Billingsly added because of prior insurance cycles he did not believe the hard market would last the five years and more carriers would become available to provide coverage. Ms. Lefton then asked if the hospital would have these rates only if they experienced no claims. Mr. Billingsly said other factors, such as the volume of care and base rates charged by the carrier, will change the premiums. He added they must work at keeping losses down and possibly find other ways to deal with the need for physician coverage for Dr. Raymond and Dr. Hahn. He said he did not recommend including the doctors coverage on the hospital ’s policy, and suggested looking at other alternatives in helping them obtain coverage for their ER practice. He said every time a doctor has a claim the hospital’s loss record would be affected, and in turn, the pricing of the premium would be affected by the loss. Mr. Billingsly added the fact that some physicians are uninsured directly impacts the hospital by the inability to approach certain markets. He said there are carriers that would have been able to bring a competitive quote to the table had there not been some physicians without coverage.

Mr. Franz said with some reservation he recommended going with the least costly option presented by Mr. Billingsly and attempt to find another way to assist the physicians in obtaining coverage.

Dr. Raymond said he, along with Dr. Hahn, had been members of an independent physicians group in Soldotna, which had group insurance. Approximately seven days prior to renewal they were notified they would be cancelled and after being dropped no other carrier was interested in providing them coverage. He said in July they were able to obtain coverage but would also be facing a tremendous increase over the next five years. Dr. Raymond added Homer Medical Clinic would also be facing the same problems when their policy renews in October, and felt they would all like to work with the hospital in regard to finding the best way to handle this. Dr. Eneboe said Dr. Bell was in despair with the insurance due this month and also felt they must all work together to find some way to survive this. Dr. Raymond said at this point in time they were covered but may decide to drop OB coverage.

Mr. Billingsly pledged the resources of his office to help create a plan, or find alternatives for coverage, until there is a more stable market.

Mr. Franz said this resolution is to meet the requirements of the State to be able to continue to offer continuing medical education credits to the Medical Staff and Allied Practitioner Staff. He said the State has tightened up their administrative requirements and wants to be assured that the BOD is going to support continuing medical education. Mr. Franz said Dr. ---Hal Smith and Ms. Colleen James, from the Education Department, wrote the Mission Statement.

Mr. Franz reminded the members the Retreat would start on Friday evening with a dinner and short presentation, a full work session on Saturday, and approximately a half-day work session on Sunday. He will be speaking with Mr. Zilm tomorrow to obtain more of an idea of the amount of time he will require. In order to include the Medical Staff during the planning meetings he suggested the members meet early in the morning on Saturday and Sunday for Board Self Evaluation, which would give the physicians time to complete hospital rounds and be able to attend the meetings mid morning.

Sublease and Operating Agreement

Mr. Lau said the Borough has sent a letter to the BOD indicating that the SAB and the Borough would like to review the Sublease and Operating Agreement. The letter indicates there are no problems. Mr. Lau referred it to the Governance Committee for them to also review the Agreement.

Mr. Green added they had been notified by the Borough attorney, Ms. Thompson, that the five-year renewal is coming up and suggested they may want to discuss the Agreement. If so, notice must be sent before September 26th. Since approximately 50% of the SAB are new or fairly new members it was felt it would be appropriate to review it so they would understand it and also understand the different rolls between the SAB and the BOD.

Dr. Eneboe mentioned the original Agreement required the physicians to have medical liability insurance. If that requirement is still in place this should be addressed.

Mr. Lau mentioned he had some concerns. After reading the five drafts of the Agreement the final draft has statements, which indicate that during review, or in the unlikely event negotiations are unsuccessful, the Agreement may be terminated. Mr. Lau asked the members to review the draft. Ms. Derry mentioned the Governance Committee had received a heads up regarding this and asked if they should discuss this at their next meeting. Mr. Lau said yes.

Ms. Olson reported the management report for August showed patient volume was greater then budgeted. The staff has been very busy with LTC occupancy at 100% and AC occupancy at 49%, which is a 9% variance. Revenue was higher then anticipated, along with employee benefits due to additional health claims. She said an additional $19,000 was budgeted to properly fund the Pension Plan. There was an operational gain of $268,839 for the month of August, and September continues to be very busy. Ms. Olson said since Mr. Button was not available for their meeting today they will be discussing financial indicators at their next meeting.

SPHI President

Mr. Lau had no report.

Administrator

Mr. Franz said other then items listed in his written report he said he participated on the Homer High School Vocational Educational Advisory Committee. He said the high school has more students enrolled than anticipated, with 504 full time students attending. They plan to set up more opportunities in which to place the students in the hospital and other businesses in order to help them make decisions on vocations and career chooses.

Mr. Franz said they are currently doing annual staff evaluations and they plan to have them completed in October. He reminded the members it is almost time for his evaluation and asked if they wanted to use a similar process as in the past. It was decided to use the same approach as last year.

SAB Chairman

Mr. Green informed the members he resolved the question with the Borough Clerk regarding write in ballots. Last year he was told the Borough would no longer allow write in votes for SAB members. This year, because of a misunderstanding, a prospective member did not submit the paperwork to the Borough in a timely fashion and he was told the individual could be added as a write in. Mr. Green said the clarification is that if there is a name on the ballot for a particular seat, names of other people can be written in, but if there is no one running for a particular seat it will not appear on the ballot and there is no way to do a write in for that seat. He also mentioned in order to file for a seat you must submit the paperwork to the Borough Clerk by August 15th, and if you fax this you must also mail the original document exactly one week after the fax is received. If you faxed on the 5th the Borough must receive the original exactly one week later, which would be prior to the 15th. Mr. Green added it has really been a learning process.

Strategic Planning

Mr. Franz had nothing more to add to what had been previously discussed.

QI Committee

Ms. Derry said the last meeting was very short and she had nothing to report.

Governance Committee

Ms. Derry said the committee has met twice. They would like to recommend having an educational topic during joint board meetings and reinstating tours of the hospital, or a short presentation from a department manager, at every other meeting of the BOD. She said the main item covered at their first meeting was Board Member Orientation and they prepared a list to be given to new members. Mr. Franz said he would provide copies. Ms. Derry said they also thought of different topics to be covered at the committee meetings and drafted an overview of what the Governance Committee is. She said the goal of the committee is to help the functioning of the BOD. Ms. Derry said they have gone over the Bylaws and did not have any changes to recommend. For an educational topic Ms. Avril will provide an overview of the Bylaws at the January meeting. She said at the next meeting they plan to go over the Sublease and Operating Agreement and other topics planned will be reviewing board policies, looking at indicators, and goals and objectives.

Mr. Lau suggested those not attending the Governance Committee meetings arrive by 5:30 p.m. to have supper and socialize before meetings.

Ms. Derry said they would be discussing awards, Medical Staff Bylaws, and would follow up on possible recommendations for Board Self Evaluation at a later date. Mr. Lau suggested covering Board Self Evaluation prior to the Retreat in order to provide a document to be used. Ms. Derry said they would cover this at their next meeting.

SAB Finance Committee Meeting,    10/01/02 12:00 p.m.,   SPH Conference Room 1

SAB Regular Meeting,    10/03/02 6:00 p.m.,   SPH Conference Rooms

SPH Retreat Social, Dinner & Presentation,    11/01/02 6:00 p.m.,    Land’s End Resort Quarterdeck

SPH Retreat Saturday Session,    11/02/02 8:30 a.m.,    Land’s End Resort Quarterdeck

SPH Retreat Sunday Session,    11/03/02 8:30 a.m.,    Land’s End Resort Quarterdeck

SAB Finance Committee Meeting,    11/05/02 12:00 p.m.,   SPH Conference Room 1

Joint SAB/BOD Regular Meeting,   11/07/02 6:00 p.m.,   SPH Conference Rooms

Dr. Raymond said he had received a call from Ms. Sandy Ellis informing him she had received a phone call from a member of the SAB who told her Dr. Raymond and Dr. McCallum were purchasing her property and that they were very hard to work with. He said this is not true and it was an inappropriate comment for the SAB member to make. He said at no time has anyone asked them what their plans are in regard to their construction and they would be happy to answer any questions from BOD and SAB members. He said it upsets him that a SAB member did this. Mr. Green apologized on behalf of the SAB and said he knew the individual and would try to address this.

Ms. Derry thanked Dr. Raymond for coming and appreciated his comments.

Ms. Avril also thanked Dr. Raymond.

Mr. Alderfer seconded Ms. Derry’s comment and felt they were off to a good start with the planning process.

Ms. Blue thanked the members of the Medical Staff and administrators for attending this evening’s meeting. She said last week her son broke his arm and when she was in the ER she was impressed with the professionalism of Dr. Raymond, Dr. Hahn, Dr. Marshburn, and Dr. McCallum and the good will they displayed toward each other, and added the nurses were great. She said she was proud to be a part of SPH and to see this whole team working well together. Ms. Blue added teamwork is very important especially when dealing with situations such as the potential insurance crisis. She felt it is a golden moment for the Medical Staff, Administration, SAB, and BOD to show leadership and develop a sense of consensus and teamwork to help solve problems together.

Mr. Green said he appreciated the attendance of the Medical Staff, their input and comments and would try to address their concerns.

On a lighter note, Mr. Eckert said after discussing insurance this evening, and since his oldest son was born at SPH and now needs braces, he was wondering if they might be able to file a claim against the hospital. After much laughter Dr. Eneboe said he didn’t think any doctor could find a lawyer to handle this.

Ms. Lefton thanked Dr. Raymond and hopes they can keep the line of communication open with him and his colleagues.

Dr. Eneboe commented that after 35 years the one thing he has learned is the utter futility in trying to head off rumors, and said he was glad to see Dr. Raymond at the meeting this evening. He added he knew the Medical Staff would like to work with the BOD, and the hospital, to make it a better place.