Health District considers budgets; consultant recommends clinic co-location

— by Susan McBain, Orcas Issues reporter —

October is just over a week old, but the Orcas Island Health Care District has already held two special meetings. The first focused on budgets—both the District’s and that of Orcas Family Health Center (OFHC)—and the second was devoted to a presentation by consultant Shar Sheaffer, CPA, of public accounting firm DZA, on how different federal designations might increase reimbursements to the clinics.

At their Oct. 2 meeting, the commissioners considered a revised budget from OFHC requesting a subsidy of $461,512 for fiscal 2020, which began October 1. Last year’s subsidy request was just under $330,000. The main ingredient in the change is an increase in salaries and benefits, including insurance coverage, for all employees to bring OFHC’s overall compensation structure closer to that of the UW Neighborhood Clinic (UWNC). Commissioner Pegi Groundwater felt that the increase, although done in the spirit of fairness, would make the overall increase in the District’s 2020 budget unsustainable. Commissioner Diane Boteler acknowledged that problem but wanted to support OFHC’s budget increase for this coming year. The commissioners voted 4–1 to approve the revised budget.

The commissioners next considered their own 2020 draft budget. The District is entitled by law to a 1% increase over the prior year’s levy plus an allowance for new construction plus any “banked capacity.” Banked capacity is the amount the District could have collected in its first year had the millage rate been set at the maximum of $0.75 per $1,000; it amounts to $230,398. (The actual millage rate in the first year was just under $0.65.) The District’s 2020 revenue from property taxes is budgeted at $1,509,057, based on the allowed 1% increase and allowance for new construction. If the District took only this amount, the resulting millage rate would be about $0.57. However, if the commissioners decide that the District needs to tap its banked capacity, the millage rate for 2020 would be approximately $0.67. The next budget draft will factor in the final approved budgets for both clinics, which will help determine needed revenues for 2020. 

Commissioner Patty Miller prepared a five-year cash flow analysis, which showed that after the substantial overall increase in subsidies for the two clinics this year—3% for OFHC and 5% for UWNC—the District’s bottom line becomes negative in 2022 even if future increases are more moderate. Given that projection, the commissioners face two big budget decisions at their next meeting: whether to tap their banked capacity, and whether to budget for any major changes to the structure of the Orcas health care system.

The latter decision will be substantially informed by the 18-page consultant’s report presented in the second special meeting, held Oct. 7. That report included analyses of financial and operational data from both clinics, together with information on federal designations that have the potential to increase Medicare and Medicaid reimbursement rates. The two most appropriate designations for clinics on Orcas are a Rural Health Clinic (RHC), a designation by Medicare for clinics in underserved rural areas, or a Federally Qualified Health Center (FQHC), a federal designation intended to provide comprehensive health services to the medically underserved, thereby reducing the patient load on emergency rooms. (OFHC is already designated an RHC.)

The report provided details on several aspects of these designations, but in the end the consultant, Ms. Sheaffer, felt that FQHC Look Alike status would be best for the situation on Orcas. Although the application and reporting processes are more cumbersome, she felt that the Medicare reimbursement rate is likely to be higher. Also, an FQHC designation would automatically make a clinic a “covered entity” in the federal 340B Discount Drug Program, allowing the designated clinic to purchase drugs at discounted prices for dispensing through local pharmacies. Both the clinic and the pharmacy would thus have lower costs.

The report also made two other major recommendations:

• That the two clinics consolidate into one location in order to minimize costs, and
• That UWNC move toward providing services using only one physician and two mid-level providers (physician assistants and nurse practitioners), rather than the current three physicians.

The commissioners will be contacting other FQHCs and providers in the area to gather further information before their next regular meeting. That meeting is scheduled for October 15, 5 p.m. – 7:30 p.m. at the Eastsound Fire Hall. The meeting has been extended 30 minutes to provide an introduction to two senior leaders from Premera, parent company of LifeWise, which will take over for Kaiser in January. District Superintendent Anne Presson has been working with Premera to ensure a smooth transition.

The Town Hall planned for October 5 was rescheduled to Monday, October 28, 5:30 p.m. – 7:30 p.m. in the Madrona Room at Orcas Center. The commissioners hope to hold another Town Hall in early December as well.

For readers interested in more detail about meetings, minutes of each meeting are available on the District website. Minutes of a meeting are posted soon after final approval by the commissioners, usually at their next meeting.