EDITOR’S NOTE: Following are two commentaries about a strategic alliance between Valley Medical Center and UW Medicine. The details of the alliance are being negotiated now by teams from both medical centers; a final agreement will go before Valley Medical’s commissioners on May 2. The first commentary is by me and the second is by Valley board commissioner Anthony Hemstad just as they appeared in the Friday’s edition of the Renton Reporter. Dean A. Radford, editor

Hemstad tossing red herrings in alliance debate

The Valley Medical Center commission has some serious business to consider – whether to form a strategic alliance with UW Medicine.

But commissioner Anthony Hemstad is hampering that business by continuously bringing up or promoting side issues that simply have nothing to do with an alliance. It’s what’s known as a red herring, or something that diverts attention away from what’s really important.

All those herrings he’s tossed into the air are now falling to the ground into a confusing mess. It’s hard to figure out where Hemstad stands, although he says now is the time to look at some of these big-picture issues.

No, it’s not.

Like it or not, the recession, federal demands for efficient delivery of health care and ever-increasing charity care are all conspiring to change how medical facilities, especially public ones, operate. That’s the reality and it demands the Valley commissioners’ full attention. An alliance with a premiere medical institution would help meet those demands – and enhance medical care for South King County residents.

And, like it or not, there’s a deadline (accepted unanimously by commissioners) that’s just a month away to make the decision to form an alliance. I disagree with Hemstad’s contention the alliance has been before the commissioners only since last January. Commissioners were briefed on the real issues facing Valley at a board retreat in October, although Hemstad missed part of it because he was in China. Valley CEO Rich Roodman has spent months exploring who would best fit Valley as a medical and business partner.

Frankly, Hemstad needs to decide whether he has the time to devote to Valley’s business; he’s the executive director of the World Trade Center in Tacoma. Just to set the record straight, MultiCare, one of Valley’s staunchest competitors, is no longer a member of that big business group. I bring that up because some argue MultiCare’s membership in Hemstad’s group was a conflict of interest for him.

In 2008 Hemstad resigned as Maple Valley’s city manager because of time conflicts with his board duties. He arrived late at Monday’s board meeting and left early before a key briefing on how to de-annex from the hospital district.

Hemstad pounds away on whether the public hospital district should exist at all. That debate has absolutely nothing to do with an alliance; doing away with a taxing district is defined in state law.

Monday, he even voted against expansion of Valley’s Birth Center, which regularly is at 90 percent of capacity. He thinks maybe the UW should weigh in on the expansion, but the alliance and its governing trustees can’t dictate how the hospital district will spend tax dollars.

Hemstad is worried about increasing the debt burden on taxpayers (hard to argue with, but still a red herring) to expand the tower, but the money is already available for the expansion, something that was pointed out to him at Monday’s meeting.

And, then there’s the move by part of Bellevue and Maple Valley to de-annex from the hospital district. That’s another reason to hold off on the alliance, Hemstad argues, because of potential changes to the district. But it’s a red herring, too, because as Hemstad freely states, de-annexations stand little chance because of the process involved, including approval by the Valley commissioners.

And if he’s worried about taxpayer burdens, he (and de-annexation proponents) also need to freely state that those who de-annex would still have to pay their obligations on Valley’s bonds long into the future. That’s self-imposed taxation without representation. And don’t forget that district taxpayers get a rebate on their taxes for hospital services, known as Valley Dividend.

Fellow commissioner Aaron Heide simply needs to step up. He didn’t engage in the discussion at the April 4 board meeting and even twice stepped out of that meeting to take a cell call – just as critic Josh Lyons was again going to question him about conflicts of interest as a board member.

Heide didn’t notify the board he would miss this Monday’s meeting; the board didn’t excuse his absence.

And, just to remind folks about Heide’s job, he’s a physician at the Auburn Regional Medical Center, also one of Valley’s competitors.

Hemstad was elected narrowly in 2007 with a promise to champion an open public process on the Valley board. Whether the process was broken is debateable and really had little to do with providing quality health care. Still, he has made a difference; now the public can watch commissioner meetings online and see for themselves the board dynamics. To be fair, all five commissioners contribute to that dynamic.

Why didn’t Hemstad present this “big-issue” agenda sooner or run for election in 2007 on such issues as rethinking whether a public hospital district is still necessary? He says now is the time for some “navel gazing” before any sort of alliance is approved.

No, it’s time to ensure the future of Valley Medical Center, addressing the realities we face now. Anything else is just a red herring.

(ANTHONY HEMSTAD COMMENTARY)

Valley Medical Center Commissioner Anthony Hemstad submitted the following commentary to the Renton Reporter’s sister newspaper, the Maple Valley Reporter.  Dennis Box, editor of the Maple Valley Reporter, shared this with me Wednesday morning.  I reported my column in an interview with Hemstad Tuesday and by attending recent commission meetings. In the spirit of full disclosure, it was written before I received Hemstad’s column. My column is long but Hemstad’s is longer, much longer than I typically allow.  But I felt it was important to allow the public to hear Hemstad unedited. Many of his ideas have been considered and rejected by Valley’s board. Dean A. Radford, editor

HEMSTAD: Owners should decide Valley Medical’s future

The 450,000 people living in King County Public Hospital District No. 1 (Valley Medical Center – VMC) own that hospital and all its assets. They should be allowed a chance to decide for themselves who should own/operate VMC in the future.

There has never been a vote about the form and existence of the public hospital district and one should take place now – before a 45-year deal is signed between the University of Washington Medicine (UWM) and VMC. That deal now looks set to be rushed to approval by the end of May, even though no final plan has yet been presented for review.

The VMC-UWM alliance as it has been outlined would have today’s elected hospital commission delegate all power for overseeing VMC’s operations to a new board whose majority would be appointed by UWM. UWM would not share in the profits/losses of the institution they will soon control. This means the new board has neither electoral accountability nor incentives to maximize quality and efficiencies as true owners would. VMC’s administration touts this situation as “the perfect alliance” in the videos and advertisements it continues to purchase to promote a deal of which few details are available to commissioners or the public.

Ramming this alliance through just months after the idea was introduced (January) and just months before an election that could swing the balance of power on the VMC Hospital Commission (November) that is split 3-2 on many issues – is highly questionable at best and at worst thwarts the public’s sovereignty.

Instead people should have a chance to vote up or down whether they wish to continue taxing themselves to subsidize VMC. If they do not, then a merger should be pursued that would – at minimum – bring in enough funds to retire the district’s bonded indebtedness for which the taxpayers are now liable.  The district has about $320 million in debts but much more than that in assets and it could surely find a merger partner – likely even UWM – if one were sought. Merging with UWM would allow VMC to stay in public control while truly giving UWM incentives to integrate VMC much more fully into the UWM system than the odd alliance that is proposed today.

Public Hospital Districts (PHDs) are an anomaly in urban areas. They were set up in the 1940s to provide property tax subsidies in areas that didn’t have a critical mass of population to support health-care providers. That was the case in the sprawling area that is within VMC’s taxing area in South King County in the 1940s. It is not the case today. What once was pasture and farmland is now wall-to-wall city. Its relatively wealthy (by state standards) inhabitants serve as a beacon to other health-care providers that are trying to enter the local market. UWM and others will likely expand their health services within the boundaries of PHD#1 in the future – and wouldn’t need subsidies to do so.

While the PHD seems to be missing its original role, it is also concerning how lucrative it has become to its administration. VMC now has the dubious distinction in making its CEO by far the highest paid public servant in Washington. At $1.2 million annually VMC’s CEO makes over seven times what Washington’s governor makes and, depending on which figures are used, between two and five times more than UWM pays its CEO – despite UWM being five times bigger than VMC.  At a time when every tax dollar is precious this isn’t maximizing the return on public investment.

Still, all of us pay our property tax subsidy to support VMC.

All the hospitals with operations immediately surrounding VMC receive no property tax subsidy – they are non-profits.  They include Swedish, Overlake, Highline, Virginia Mason, Franciscan, MultiCare and Providence (and Auburn Regional – which is for profit) all providing health care within 25 miles of VMC and all without demanding property tax dollars in order to carry out their work. All of them also provide substantial amounts of charity care – as all hospitals do.

Health care costs too much in America.  We pay over 18 percent of our GDP to health care while most developed countries spend half that while getting better health care outcomes.  Our problem isn’t spending too little.  The problem is redundancy and allocation.  Spending millions on VMC’s CEO and pursuing an alliance – and not a merger – are prime illustrations on the wrong choices being made with our limited public health-care dollars.

In a merger real savings could take place and layers of management could be eliminated. That is truly in the public interest (but not in VMC management’s interest).  Instead the deal VMC is hurtling toward will preserve relatively high cost “silos” with separate management and minimal cost savings.  Is this truly the “Perfect Alliance” touted by VMC’s advertisements?  It might be perfect to some, but it doesn’t seem to be perfect if you take the public’s interest into account.

There is no need to do this deal today. Some legislative changes are required to allow for PHDs to merge. Let’s take the time to see what the people who own VMC want to do with it, and then put together the right deal that potentially could lower taxes and increase efficiency and quality in local health care provision.

Once a subsidy is started it is almost impossible to stop. Vested interests fight hard to continue subsidies even when the original justification is long gone.  A decision that could last for 45 years being made by as few as three commissioners on a starkly split hospital commission right before an election is a travesty. Let the people decide.

Anthony Hemstad of Kent is a Valley Medical Center commissioner.