TONASKET – “Yikes.”

That, in a word, was the response of the only person who expressed any interest in buying the financially struggling North Valley Assisted Living facility when he was presented with financial and bond information to examine.

Actually, that was his entire response, said NVH district CEO Linda Michel in an interview on Thursday, March 29, where she defended the recent decisions of the Board of the Commissioners, hospital administrators and herself.

The hospital district recently won its day in court, at which an attempt to halt the closure of the assisted living facility was denied and a petition asking for the recall of the entire Board of Commissioners was rescinded before a final decision on it could be rendered.

Michel reviewed the recent financial history of the hospital district, including the hospital’s indebtedness to Okanogan County and decisions to close the Tonasket and Oroville Family Medical Clinics.

An oft-suggested option was to have the district attempt to sell the Assisted Living to a private company.

It’s not that it wasn’t tried, Michel said. But there was little interest from buyers.

“One gentleman … said DSHS had asked him to call me,” Michel said. “He was from Oregon and had other privately-owned assisted living facilities. They were all much bigger than ours. He asked me to send financials and information about the bond. Whatever he asked me for, we sent him.

“The only response I got back from him was, ‘Yikes.’ And I never heard from him again.”

The closing of the Assisted Living has been controversial, to say the least, but Michel said that every effort that stood any chance of success was considered by her and a committee consisting of herself, four hospital senior leaders and two commissioners.

“We looked back at seven years of financials to find a profitable year to mimic,” she said. “We didn’t find one.”

A letter asking the community for input was published in the Dec. 6, 2012 issue of the Gazette-Tribune, but in the week between its publication and the next Board of Commissioners meeting on Dec. 13, Michel received just one phone call.

Michel said that she and the board were not expecting the full house that arrived for the Dec. 13 board meeting.

“(That was when) we found out that the Concerned Citizens group had been formed,” Michel said. “They made many comments, they were already angry. I understand that emotion. I have parents too, that I’m morally responsible for (noting that her father, who had been in an assisted living facility, recently passed away).

“It was my mistake not to put that we needed an immediate answer, that we could not go on,” she added. “I thought my letter indicated that, but that is not the perception of the Concerned Citizens group. So that was my mistake for not spelling it out better.”

The Concerned Citizens group hosted a meeting the following week at the Tonasket Community Church, which Michel, Chief Financial Officer Helen Verhaselt and Long Term Care director Linda Holden attended. But during that week, the district also received a letter from county commissioner Leah McCormick urging immediate action on reducing the hospital’s warrants, which had neared $3 million.

“That made us even more concerned about our losses,” Michel said. “I took that letter (and read it at) the meeting.

“We had been excited and were just going to go and write down their ideas. But it turned into more of an inquisition, and anger. We came away from that feeling quite deflated.”

The ideas that came out of that meeting – primarily to sell or lease the A/L to another entity, or to run a special levy, Michel said, weren’t going to happen given the time frame.

“With a levy, it would have taken 18 months for that money to start coming in. We would have to survive for that long, and we decided, in the best interest of the district, that we could not.

“It was a very emotional decision,” Michel said. “We’re tax-payers too. I’m 62 years old and am going to need to a place to live at some point. So, was this just something we came up with as something we wanted to do? No. We worked on it day and night for months… There was no solution.

“Brewster is closed, Goldendale is closed, Davenport is closed, and it’s all because of Medicaid reimbursement. I know people need Mediaid – I’m from Appalachia, Eastern Kentucky, so I understand that. I’m not against Medicaid, but if you can’t take care of someone with the reimbursement, what do you do? If you are that far behind on your mortgage, what do you do?”

Medicaid woes

The Medicaid question was an issue even back in 2005, when the district asked the Hyatt Management Corporation – an in-state consulting firm that specializes in long term care issues – to come in and advise on splitting the district into the two divisions that exist today: Hospital and Long Term Care.

The Hyatt report noted major drawbacks to selling or leasing included the fact that the full kitchen and laundry were in the hospital; heating and cooling came from the hospital plant; and water and sewage were also tied to the hospital.

Hyatt also noted, “The problem with the A/L is that, despite its good occupancy history … the census is almost all Medicaid funded with an average reimbursement at about $72 (per patient) per day. Right now the hospital is paying in excess of $77 per resident.”

That was 2005. In 2012, the reimbursement was just over $59, while the cost per day was about $82.

“There were comments at the time when we went into warrants,” Michel said, “that we should close the Assisted Living and the nursing home.

“As a public hospital, we can’t choose (whether to accept patients based on their Medicaid status,” Michel said.

Michel said claims that faulted the district for not adequately assessing patients for their level of care – which could have meant greater reimbursements or transfers to the nursing home, which is not in such dire straits – were false.

“According to law, DSHS is the only one who can assess Medicaid patients,” she said. “They’re here every Wednesday to do that. They do it weekly.”

And though it didn’t factor into the decision to close the Assisted Living (which was announced on Jan. 9), 2013 has seen even further cuts to Medicaid reimbursements.

The board approved Michel’s recommendation to close the facility as of March 31, a span of 87 days. Michel pointed out that the law required 60 days.

She also took exception to the reaction of some who objected to the district sending letters directly to the Assisted Living residents informing them of the closure.

“That was required by law,” Michel said. “We had to send those to the main caregiver and to the resident. We didn’t want to do that, but we had to do that, according to DSHS.

“I understand the emotions…. I’ve seen people leave that I’ve cried about. I understand those emotions. We’re not hard-hearted people.”

Previous changes

Last August, before the Assisted Living closure came to fruition, Michel and the commissioners pushed through a number of changes to try to bring down the warrants, which had grown to about $3 million. After evaluating each area of hospital operations – something the Board of Commissioners noted had not been done previously – the district canceled five contracts (with entities such as Hyatt and Harmony Health Care) for a 2013 full-year savings of $104,000, suspended its contract with NAC Architects ($125,000), renegotiated contracts with Caribou Trail Orthopedics and Coast to Coast (which provides emergency room physicians) to the tune of nearly $80,000; closed the Tonasket Family Medical Clinic ($85,000); and laid off three senior administrators, two maintenance workers and did not re-fill a position vacated by a retirement.

Also, construction on the west wing of the second floor was halted. Construction on the east wing continued because nearly all of the required materials had already been purchased and was recently completed using mostly in-house workers.

“The west wing will not be completed until we’re out of debt,” Michel said. “We may put in some sheet rock that we had already purchased, but beyond that there will be no more construction there.”

The east wing opened earlier this year and houses the specialty clinics and recovery rooms.

The clinics, Michel said, simply were unable to see enough patients to even come close to breaking even.

The Oroville clinic closed earlier this year after its one remaining family practice physician left.

“We closed the Tonasket clinic because its volumes were so low and there were other options in town,” ichel said. “It was totally an issue of not being able to see enough patients.”

As for the Oroville clinic, when Dr. Theresa Dicroce resigned, it legally could not stay open.

“We were looking for over a year for a second M.D. to add to the clinic system,” Michel said, producing documentation from other clinics’ struggles across the country. “There have been allegations that we do not know how to recruit and that there are other ways to find physicians. I beg to differ; there are family practice shortages all over the United States, especially in rural communities.”

The resignation of Dr. Dicroce proved to be the final straw for the Oroville clinic.

“A rural health care clinic has to have one M.D.,” Michel said. “We had to close. So in an effort to continue to provide the community with health care that they need, I chose to contact Wenatchee Valley (Medical Center). Whether that was a mistake or not – we all make mistakes. I don’t think it was. They have the resources, it’s easier to recruit from Wenatchee, and they already had half of the building.

“I didn’t want the community to go a day without the doctors they needed. I negotiated with Peter Rutherford to lease the other half of the building and bring providers in. We left the building one day and they started practicing there the next day.”

Michel said WVMC wants to buy the building.

“We have to get three appraisals; we’re waiting on the last one,” Michel said. “It will probably be May before we proceed. We’ll have to post the intent to sell for two weeks, and then we have to have comments at an open public board meeting. Then the board will decide whether or not to sell.

“There have been allegations that we’re not following the RCWs. Things have been sent to Mr. Rutherford to cease and desist from talking to us.

“We’re following the RCWs. We have representation by (attorney Mick Howe) that’s very keen on the RCWs. We’re very confident we’re following them. In the meantime, they are leasing, and that’s within the board’s scope of responsibility to lease the property without discussion.”

Michel said moving Physical Therapy to Oroville is not an option because construction would be required.

The layoffs, Michel said, also account for an overall savings in administrative costs for the district.

“The other senior leaders absorbed the positions of those that were laid off,” Michel said.

The layoffs themselves will save the district about $503,000, though half of that was offset by a combination of raises to the existing administrators who absorbed those jobs; and the hiring of Kelly Carriker late last year as Chief Information Officer to manage the district’s computer systems (and who absorbed other duties such as food service and laundry).

Other raises included in an estimated $278,000 in increases between 2010 and 2013 include the restoration of a five percent temporary wage cut, negotiated by previous CEO Warner Bartleson, that he had promised would end in 2011, along with raises to those affected.

Michel, who took over as CEO in early 2011, also gave raises to several administrators who, according to Milliman’s health cost guidelines, were paid significantly below the low end of the industry standard for their positions. Milliman, based in Seattle, provides what is considered a “gold standard” for such estimates.

“They rate hospitals according to size and salaries,” Michel said. “I did find that some of our senior leadership was underpaid.”

Overall the net effect of the $278,000 in raises over that three-year period combined with the $503,000 saved through staff reductions, is a savings of just $225,000 for 2013.

(Managing Editor Gary DeVon’s editorial, page A5, covers more on the salary issue.)

Books

Michel said that accusations that the hospital district’s books aren’t being properly kept are off base, and that one needn’t take her word on the issue. Audits both by the state and by health care auditing firm Dingus, Zaracor & Associates (DZA) have constently yielded high marks.

“(The state) is changing our audits to every other year (from annually) because our books are so clean,” Michel said. “We follow general accounting principles. I’m confident that if we’d been booking anything wrong in either division over the last seven years, one or the other of those would catch it. Have we had recommendations (for changing some practices)? Absolutely. That’s their job. But as far as booking anything wrong, we’ve never been cited for that.”

She said that accusations that $120,000 that have been made that supposedly have not been going to the Long Term Care division are incorrect.

“One individual keeps saying we’re booking (the $120,000) as both general revenue and as Long Term Care revenue.”

The budgeted income statement shows columns for the Hospital Division, the Long Term Care Division, and a Consolidated column that adds the total of the two divisions.

“You just need to look at the headers,” Michel said. “The $120,000 goes to the Assisted Living.”

The exception to that is Maintenance and Operation (M&O) funding, which goes into the district’s overall fund and can be used wherever needed.

“We have two divisions, but we also have the district, and that’s where the M&O money goes,” Michel said. “It goes into the district, and it gets used for whatever we choose to use it for, operations of any kind.

“If there is any left – and there has been lately – everything extra goes to the treasurer. We don’t even write a check that the county doesn’t sign off on. Everything we do. Payroll checks, everything.

“The first thing she does every month is take $18,000 off the top of our income to pay for the bond. It comes out of the district’s M&O levy, because that was the way it was designed. The bonds were financed through M&O. There was no vote. It was just an M&O levy bond.”

The end result is that the warrants, as of Thursday, stood at $1.3 million, down more than half since the beginning of the dramatic changes that began last year.

The future

Of course, this leaves the Assisted Living building standing empty, at least for the short term. Michel said a committee including Michel, board members Lael Duncan, Clarice Nelson and community member Karen Schimpf, will determine how the building will be used. Two other community members were invited to participate, Michel said; one declined, and the other didn’t respond.

“The first thing we need to do is wait, and wait, and wait for the state to tell us what we can do with the building,” Michel said. The committee has options they have considered, moving Physical Therapy and some physician apartments into the building, among other things.

“That will make some people mad, but it’s a huge revenue generator, and it’s not very accessible. And that rumor was out before we even decided to close it.

“We will not do any construction. We can use it the way it is.”

Michel said, despite the uproar, she believes the decisions were the right ones.

“I feel that the board and senior leadership have stood tall,” she said. “We haven’t demeaned them the way we feel we have been demeaned. I feel our morality has been challenged. It is a moral issue and I understand that. But I am a moral person and have faith that my seniors leaders are as well as the board.

“I understand their emotions and I absolutely respect their opinion. During the course of government, presidents and governors have been elected and things have happened that I really don’t like at all. But that’s government. We elect people to make those decisions.

“I’m a taxpayer, too,” she added. “I pay taxes to this county, as do all of the senior leaders. We care about this community. We live in this community. I spend my money at Grant’s, at Roy’s, at Rancho Chico, just like everyone else here. I’m not trying to destroy this community, nor is the senior leadership, nor is the board.”

Correction: Information regarding wait times at Apple Springs in Omak, included in a quote by Michel that attributed the information to the Concerned Citizens group, has been deleted after it was determined to be inaccurate.