About PH&S

About Providence Health & Services in Alaska
May 10, 2007

Providence Health & Services (PH&S) is positioned to dominate the state’s health care market indefinitely with three times more operating revenue than its closest competitor, $321 million budgeted to build new facilities between 2005 and 2008, and the former Alaska Commissioner of Health and Social Service in charge of strategic development.

PH&S Alaska operates four hospitals and many other ventures in south-central Alaska. The company has no presence outside of south-central Alaska.

According to PH&S's newly released 2006 financial statement, PH&S Alaska produces the highest profit margins of all PH&S regions. In 2006, Providence Alaska created $57 million in total profit for a 9.6% margin. While the Alaska division produces 10% of PH&S operating revenue, it generates 16% of the system’s operating profit.

Providence Alaska Medical Center in Anchorage alone accounts for almost half of all hospital admissions in the state. The company employs more than 4,000 people, making it Alaska’s largest private employer.

Operations

Anchorage:

Anchorage is the base for PH&S in Alaska. The company operates one of the city’s two general acute care hospitals as well as long term care and assisted living facilities, the Providence Physician Service Organization, and an ambulatory surgery facility (Providence Surgery Centers, LLC). The company also recently opened the 60-bed St. Elias Specialty Hospital as a for-profit joint venture with BridgeCare, an Alabama based firm.

Providence Alaska Medical Center (PAMC)
PAMC is the largest hospital in Alaska. The 363-bed facility accounted for 42% of the state’s total acute care hospital admissions in 2005—and more than half of all hospital profit in the state. PAMC provides a full range of medical, surgical, and tertiary services at the main hospital, Providence Children’s Hospital, Providence Cancer Center, Providence Heart Center, and Providence Maternity Center. Providence LifeGuard Air Ambulance transports patients by helicopter from facilities around the state to PAMC.  In 2005 PAMC posted $29.5 million in net profit, or a 6.8% total margin.

Mary Conrad Center
This 90-bed nursing home has been managed by Providence since 1986. PH&S Alaska describes the skilled nursing and rehabilitation services facility as a “home-like environment.”

Providence Extended Care Center
This 224-bed long-term care facility is the largest in Alaska.

Beyond Anchorage:

Providence operates three municipally owned hospitals outside Anchorage—operating facilities at Seward and Valdez under management agreements and a facility at Kodiak under a lease.

Providence Seward Medical Center (PSMC)
Providence has operated a 6-bed hospital and a 43-bed long term care facility in Seward since 1996. In 2005, PSMC lost $402,000 for a -3.7% total margin.

Providence Valdez Medical Center (PVMC)
The City of Valdez pays PH&S to manage this 11-bed hospital and a 19-bed long term care facility. In 2005, PVMC lost $146,000 for a -1.9% total margin.

Providence Kodiak Island Medical Center (PKIMC)
Providence began managing this 25-bed hospital and a 19-bed long-term care facility in 1996 under a 10-year renewable lease from the Kodiak Island Borough (KIB). PH&S collects no management fee and actually pays the borough $720,000 annually for the right to operate the facility. In 2005, PKIMC posted a $769,000 profit for a 3.6% total margin.

Growth

PH&S is cementing its dominance in Alaska with a plan to spend $321 million to build a host of new facilities by 2008, including:

• new medical office buildings
• a heart institute
• another cancer center
• administrative offices
• visitor housing and
• a 40-acre commercial development that 'surrounds' the competing Mat-Su Regional Medical Center.

Expanding its strength in the long-term care market, PH&S opened the for-profit St. Elias Specialty Hospital in Anchorage on December 18, 2006. This $24 million facility, a partnership between PH&S and Bridgecare Hospitals from Alabama, is the only one of its kind in the state. St. Elias Specialty Hospital focuses on non-critical patients requiring long-term acute care, and will receive patients from hospitals throughout the state. Once St. Elias Specialty Hospital demonstrates that patients stay at the hospital an average of more than 25 days, administrators say that they will seek certification by Medicare as a long-term acute care hospital.

The State of Alaska is currently considering applications for certificates of need for seven PH&S Alaska projects totaling $48 million. The most controversial project seems to be the proposed imaging center in the Matanuska-Susitna (Mat-Su) Valley.

Matanuska-Susitna Valley Controversy

After losing a bid to partner with the Valley Hospital Association, PH&S Alaska is aggressively undermining the new community hospital in Mat-Su Valley, first by purchasing land surrounding it, and now by seeking to open a competing imaging center without Certificate of Need approval.

In 2002, the Valley Hospital Association decided to build a new community hospital in the Matanuska-Susitna Valley that could treat more patients locally. Lacking the cash to undertake the project, the association’s board entertained several proposals, and ultimately entered into a joint venture with for-profit Triad Hospitals, Inc. Under the agreement, Triad agreed to spend up to $75 million on the new facility, maintain a local presence on the board of directors with 50% of the board’s vote, and proportionately share the hospital’s profits with the community. The association rejected a bid from Providence out of concern that the company would push to stabilize patients and then transfer them to Providence Anchorage Medical Center rather than keeping them at “our own full-fledged hospital” said Elizabeth Ripley, spokeswoman for the Mat-Su Valley hospital. “We wanted to deliver care locally,” she said.

The community broke ground on the new 74-bed Mat-Su Regional Medical Center on May 17, 2004 and opened its doors on January 27, 2006.

Shortly before the deal with Triad was approved, Providence had announced it had purchased an option to buy 99 acres of land just south of the new Mat-Su hospital. In June 2005, Providence announced that it would relocate two of its physician clinics to a new medical office building it was developing on the land. In December 2005, Providence announced a joint venture with the Imaging Associates of Providence (IAP) radiology group. The joint venture, Mat-Su Imaging Services, would locate in the new office building.

Providence did not file an application for a certificate of need for the imaging facility; but in March 2006 Norman Stephens, CEO of the new Mat-Su hospital, wrote to Health Commissioner Karleen Jackson asking the state to investigate whether or not a certificate of need was required. In doing so, Stephens said, “Mat-Su Regional Medical Center may be adversely and substantially affected by the violation of the Certificate of Need statute…”

Commissioner Jackson agreed with PH&S Alaska that the imaging facility was actually a physician’s office, not a “heath care facility,” and was therefore exempt from the certificate of need requirements. Mat-Su appealed, arguing that “IAP does not meet the exemption for physician offices as its majority investor is a hospital, Providence Health System. Every day that IAP is allowed to continue operating its MRI is a violation of the law and financially penalizes Mat-Su Regional. ”  (Imaging is a widely known as a lucrative health care business that acute care hospitals often resent because independent imaging operations can “cream” revenue away from a hospital’s fragile service mix. )

Jackson rejected that appeal. She reversed herself, however, after a court ruled that an independent diagnostic testing facility in Fairbanks, Alaska, required a Certificate of Need. She informed IAP on August 17, 2006 that a certificate of need would be required for Mat-Su Imaging Services.

At the request of Ed Lamb, CEO of Alaska Regional Medical Center, Jackson informed Providence that IAP’s Anchorage Abbott Road Imaging Facility would also require a certificate of need.

Providence appealed both decisions. Administrative Law Judge Terry L. Thurbon consolidated the cases in November 2006, and is now considering the matter.

PH&S Alaska currently owns at least 40-acres of land that surrounds the Mat Su Regional Medical Center. The former Providence employee who secured the land purchase while he worked for the hospital now holds a 10-year development agreement that gives him exclusive rights to develop the property, where he hopes to build a hotel, retail and office space, and several “destination restaurants. ” Asked about the property “in the vicinity of the new Valley Hospital,” Providence Alaska Region CEO Parrish stated, “It's not only in the vicinity, it completely surrounds it. ”

Executives

Al Parrish became CEO of the Providence Alaska Region in 2002 after working in the Alaska tourism industry for the previous 20 years. In a recent interview, Parrish acknowledged PH&S Alaska’s ambitious plans, saying, “It probably does give the appearance, which is an accurate appearance, that we really have a lot of irons in the fire. But the need was there and we said we will address that need. ”  Providence reports Parrish’s 2005 salary as $417,641.

Robert Dvorak earned a $338,162 salary in 2005 for his work as Providence Alaska’s chief financial officer.

Susan Humphrey-Barnett is the area operations administrator for PH&S Alaska, where she is in charge of operations outside of PAMC. Her 2005 salary was $191,844.

Joel Gilbertson, former Alaska Commissioner of Health and Social Services, is now regional director for strategic development and administration of PH&S Alaska. Providence reports paying Gilbertson $48,848 for 480 hours of work in 2005, more than $100 per hour.

Dr. Roy Davis is chief medical officer at Providence Alaska Medical Center in Anchorage. Providence reports a salary of $259,251 in 2005.

Bruce Lamoureux became administrator for Providence Anchorage Medical Center in April 2006, after moving from Santa Monica, California where he had been CEO of St. John’s Health Center.