Four-pronged approach preserves care access on San Juan Island

March 1, 2014

PeaceHealth involvement called essential to new hospital's viability


When PeaceHealth's Jim Barnhart thinks about what upwards of a dozen community leaders accomplished on rural San Juan Island, Wash., the often-quoted adage of anthropologist Margaret Mead comes to his mind: "Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it's the only thing that ever has."

PeaceHealth's Peace Island Medical Center in Friday Harbor, Wash.

Faced with the prospect about eight years ago of losing virtually all health care services on the island, the small group of islanders swung into action. Working with a consultant, they figured out a financing model that would support a new inpatient hospital and select outpatient services. They brokered a partnership with PeaceHealth to establish Peace Island Medical Center in San Juan's Friday Harbor.

The 10-bed critical access hospital opened in November 2012. As a critical access hospital, it receives a more generous reimbursement from Medicare for services than a community hospital would. The hospital also receives tax revenues, which in the last fiscal year amounted to about
$1.4 million. The group of community members also raised more than $10 million in donations on an island of just 6,000 residents to go toward the $30 million cost for the new hospital.

Barnhart, the chief administrative officer of Peace Island Medical Center, said the four-pronged financing model — a model that includes local tax revenues, philanthropic dollars, having the critical access hospital designation and having the operating heft of an established health care system — could prove viable for other rural communities struggling to preserve health care services.

Worst access in Washington
Located about 80 miles northwest of Seattle, San Juan Island is the most populated of a group of about 172 islands. Not all the islands are inhabited; some are family owned and sparsely populated. San Juan Island is one of four in the archipelago with mainland ferry service. San Juan's natural beauty and temperate climate attract wealthy retirees from the mainland, with some of them living full-time on San Juan, and some for part of the year. Shopkeepers, artists, farmers and small business owners also make their homes on the island.

Since the mid-1970s, the island had had a small outpatient health facility called the Inter Island Medical Center. Since 1991, a local property tax levy had supported the center; and the board-run San Juan County Public Hospital District had overseen it. But, by the late 1990s and early 2000s, the medical center was approaching bankruptcy as it tried to provide urgent care and 24-hour, on-call care to San Juan's small population. Barnhart explained that reimbursements couldn't keep up with the costs of staffing the medical center.

Thomas Cable was among the islanders who were concerned about Inter Island Medical Center's sustainability. He said almost all of the medical center's tax income went to offset uncompensated care, charity care and staffing costs.

"The clinic was digging itself into a financial hole," Cable said. He and about a dozen community leaders formed a committee around 2006 to address the problem, with many of the committee members affiliated with the nonprofit fundraising organization, the San Juan Island Community Foundation.

In the mid-2000s, according to the Washington State Department of Health, San Juan County as compared to all other counties in the state had the fourth highest percentage of uninsured people — many of the island's small business owners and service industry workers are uninsured. And, with the islands in the county only accessible by a ferry system or by plane — it's an hour-plus ferry ride from the mainland terminal in Anacortes, Wash., to San Juan Island — the county had the worst health care access in the state, according to the health department. Cable said with most health care services only available off-island, many residents delayed getting care until treatable conditions became health crises.

PeaceHealth to the rescue
Working with the consultant, the committee of community leaders determined it would be untenable to continue the Inter Island Medical Center under its failing financial model and that even tax increases wouldn't solve the problems of being a stand-alone facility serving a small population. Cable said, "We originally thought (the island community) could do this on our own. But the more we learned about the magnitude of the problem, the more we saw we needed a partner."

The group also realized it would be necessary for the facility to be a critical access hospital. These are low-volume facilities with 25 or fewer beds offering around-the-clock emergency care. The critical access designation affords facilities a more generous, cost-based reimbursement formula from Medicare, as compared to the prospective payment formula used with other hospitals.

The committee talked with several systems about affiliating before deciding to partner with PeaceHealth. Barnhart said the committee was impressed that PeaceHealth "provides patient-centered care, nonjudgmental care and has concern for the vulnerable. They liked that PeaceHealth has a good track record with rural facilities, solid finances, solid performance" and experience with critical access hospitals. PeaceHealth operates nine facilities in three states, three of them critical access hospitals.

Cable said the committee saw "we needed PeaceHealth or the project would be dead. And PeaceHealth was fabulous to work with." He said the committee knew that they wanted a partner that would serve everyone who sought care at the facility, and they knew PeaceHealth "had a commitment to this type of compassionate care."

Ties that bind
The committee's work led to a 50-year agreement between PeaceHealth, the San Juan County Public Hospital District and the San Juan Island Community Foundation. PeaceHealth agreed to provide $20 million toward building the nonprofit hospital, a debt it will repay with cash from operations. The hospital district pledged revenues from the health care taxing district for the length of the agreement — those revenues will subsidize projected operating losses. The foundation committed to raising funds to support hospital construction.

Cable, a retired venture capitalist, chaired the fundraising group for the project, through the foundation. He said, "It was a project people could relate to. And, it wasn't a matter of convincing them of the need but convincing them that we knew what we were doing."

Peace Island Medical Center has around-the-clock emergency care as well as diagnostic imaging, outpatient oncology services, primary care and some specialty care. There is physician coverage 24 hours a day. Patients can access some care that is unavailable on the island, via telemedicine. For emergency needs beyond the capability of Peace Island Medical Center clinicians, the medical center coordinates with an air ambulance service, to fly or helicopter patients to the mainland, often to PeaceHealth St. Joseph Medical Center in Bellingham, Wash.

Located about a mile away from the defunct Inter Island facility, Peace Island employs about 55 people, most of them former staff of the old medical center.

Cable said his committee is extremely proud of the "spectacular facility" that came about because of the islanders' support. "We can't walk down the street or go to the grocery store without people stopping us to thank us" for helping ensure health care services would continue on the island, he said.

PeaceHealth answers critics with positivity

The American Civil Liberties Union has raised concerns about the agreement forged among PeaceHealth, the San Juan County Public Hospital District and the San Juan Island Community Foundation. The ACLU has said the agreement violates the state constitution and has said it is unlawful for tax subsidies to go to an organization that restricts access to services for religious reasons.

In a letter to the community a year ago, Nancy Steiger, chief executive and chief mission officer of the PeaceHealth Northwest Network, wrote that with all that had been accomplished through the partnership, it "is surprising and disappointing, then, that so much attention has been focused on what we don't offer rather than what we do." She said services that PeaceHealth won't provide because of religious values — services including abortion — "weren't provided at Inter Island Medical Center previously, are not usually hospital-based and typically wouldn't be found in a facility the size of Peace Island Medical Center in any case." She said that PeaceHealth has been assured its agreement is on legal solid ground.

Kathy Dean is PeaceHealth system vice president for marketing, communications and public affairs. She said PeaceHealth is focusing on the positive when it comes to Peace Island Medical Center, by explaining how it is adding services to that facility, not taking them away. She noted that PeaceHealth only enters into communities when it is invited and when it is the right fit.


Copyright © 2014 by the Catholic Health Association of the United States
For reprint permission, contact Betty Crosby or call (314) 253-3477.

Copyright © 2014 by the Catholic Health Association of the United States

For reprint permission, contact Betty Crosby or call (314) 253-3490.