People living in district should decide Valley Medical’s future | Anthony Hemstad

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 farm land 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 No. 1 in the future — and wouldn’t need subsidies to do so.

While the PHD’s original reason for existing is gone, equally concerning is how some of the subsidy is spent today. VMC’s CEO is by far the highest paid public servant in Washington. At $1.2 million annually VMC’s CEO is paid over seven times Governor Gregoire’s salary ($167,000) and three times President Obama’s ($400,000). UWM, which is five times larger than VMC, pays its CEO $250,000 (according to the Office of Financial Management, other published sources cite $750,000 – either way paying much less than VMC for a much bigger job). With the painful cuts being made at almost all other governments, VMC’s golden CEO package is clearly not the best way to use limited public resources.

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 more than 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 towards 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.