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93-09 Agreement With Providence Health Care System Of Alaska For The Lease Of Kodiak Island HospitalMr. Joseph M. Smith, Vice President of Operations Lutheran Health Systems PO Box 6200 Fargo, ND 58106-6200 Dear Joe, e-413-()7 Kodiak Island Borough 710 MILL BAY ROAD KODIAK, ALASKA 99615-6398 (907)486-9300 February 26, 1997 As you know, the Kodiak Island Borough completed an agreement with Providence Health Care System of Alaska for the lease of Kodiak Island Hospital on February 20, 1997. The new agreement will take effect on April 21, 1997. The Kodiak Island Borough's present management agreement with Lutheran Health Systems (LHS) will, therefore, terminate on April 21, 1997. We appreciate the commitment of LHS in accommodating and assisting in our negotiations with Providence for the long term benefit of health care delivery at Kodiak Island Hospital. I appreciate the good working relationship we have had throughout the years and the important part you and LHS have played in bringing us to this important threshold for state of the art future health care delivery in Kodiak. The outstanding work that you and Ed Myers have accomplished the last five years was a major factor in our successful negotiations with Providence. I wish you personally and LHS all the best in your future endeavors. I hope you will be able to visit us at least one more time and tour the new facility in the near fixture. Thanks again for all your great help! Sincerely, KODIAKISLAND BOROUGH Jerome M. Selby Borough Mayor December 30, 1996 Jerome Selby, Borough Mayor Kodiak Island Borough 710 Mill Bay Road Kodiak, AK 99615 "=J Lutheran Health Systems JAN 0 6 '997 �d�<!dt3r S �JtilCo` RE: Management Agreement with Kodiak Island Hospital and Care Center Dear Jerome: The management contract dated May 15, 1993 is between Kodiak Island Borough and Lutheran Hospitals and Homes Society of America ("LHHS"). This is to advise you that "LHHS", is undergoing a statutory merger with its subsidiary, Western Health Network, Inc. LHHS will be the surviving corporation and will be changing its name to "Lutheran Health Systems". The operations of the various LHHS facilities, including all contractual relationships, will be unchanged. The management contract will remain unchanged except for the name. The merger and name change are anticipated to be effective January 1, 1997. Please contact us if you have any questions. M. Smith cc: Facility Administrator 4310 17th Ave. 5. W. P.O. Box 6200 Fargo, ND 58106-6200 (701)277-7500 Fax(701)277-7636 07/01/98 09'58 t3. 1 70i 280 7753 LHHS-FARGG AMENDMENT Amendment to the Management Agreement between Kodiak island Borough, Kodiak, Alaska and Lutheran Hospitals and Homes Society, Fargo, North Dakota dated May 15, 1993. This document amends the aforementioned Management Agreement by deleting Section a, Paragraph 2, Attachment 2 and any other reference to Incentive PaymentICredit. Further, the parties agree that the base management fee of the Management Agreement, together with any approved increase up to 5% per year sha!I be the sole compensation to Lutheran Hospitals and Homes Society for management services under the terms of the Management Agreement unless otherwise provided for in the Agreement. Agreed to this day of July 1, 1996 by and between Kodiak Island Borough and Lutheran Hospitals and Homes Society. By Thomas M. Ming?Oj Senior Vice President Lutheran Hospitals and Homes Society of America Attest:[�Il By Jero a Selby, Mayor Kodiak Island Borou 9' 02 S%.iZ.tt»1_e0,0, - 8KA * %9i MANAGEMENT AGREEMENT Between LUTHERAN HOSPITALS & HOMES SOCIETY and THE KODIAK ISLAND BOROUGH For the Operation of KODIAK ISLAND HOSPITAL AND CARE CENTER MANAGEMENT AGREEMENT This agreement made and entered into on this _ day of mann — between Kodiak Island Borough, Kodiak, Alaska, hereinafter referred to as the "Borough" and Lutheran Hospitals and Homes Society, a North Dakota not-for-profit corporation authorized to do business in the State of Alaska with the Home Office in Fargo, North Dakota, d/b/a LHS Management Company, hereinafter referred as LHS Management Company. WITNESSETH Whereas, the Borough is the owner of certain real property consisting of a Health Care Facility together with improvements located thereon, and certain equipment located in and about the premises known as Kodiak Island Hospital and Care Center, hereinafter referred to as "Facility"; and Whereas, the Borough, in the interests of sound fiscal management and to ensure the continued operation of the Facility in a professional and efficient manner, has requested LHS Management Company to undertake the management of the Facility; and Whereas, LHS Management Company is experienced in the various phases of Health Care Management and maintains a professional staff for the purpose of advising and managing hospitals, clinics, nursing homes and other health related operations. Now Therefore, in consideration of the foregoing and the terms and conditions hereinafter contained, the parties intending to be legally bound hereby do agree as follows: 1 1. AGREEMENT TO MANAGE engages U15 Management L;ompany Management Company accepts such engagement to manage Kodiak Island Hospital and Care Center according to the terms and subject to the conditions both fully hereinafter set forth. LHS Management Company hereby covenants, warrants and represent to and with the Borough that throughout the term of this agreement, the administration of the Facility and its operations shall conform with the applicable license requirements of all government bodies. 2. SCOPE OF AGREEMENT LHS Management Company shall be an independent contractor with respect to the duties and responsibilities granted under this agreement. LHS Management Company Subject to the general supervision and control of the Borough, LHS Management Company accepts and the Borough hereby grants LHS Management Company the sole and exclusive right to supervise and direct the day-to-day management of the Facility. 2.1 LHS Management Company shall have the duty to manage the Facility in an efficient and effective manner to the extent as though it were managing its own property, subject only to the provisions set forth below. 2 2.2 Kodiak Island Hospital and Care Center shall be the holder of all licenses, accreditation certificates and contracts which currently exist are as required Tor continued operation of the Facility, and shall continue to be the "Provider" within the meaning of all third party contracts for health care services. The Facility shall be the employer of all of employees, with the exception of the Administrator and Finance Director. It is recognized that the Administrator and Finance Director are employees of LHS Management Company and subject to the personnel policies of LHS Management Company. 2.3 It is the intention of the parties to this agreement that LHS Management Company shall not be responsible for the operating losses of the facility. It shall be authorized to pay for all operating expenses from Facility funds. Operating expenses are defined as including the administration fee paid to LHS Management Company; the cost to amortize any and all debts due from the Borough to any lending entity; the salaries and benefits for all employees of the Facility, including the Administrator and/or Assistant Administrators, nurses, etc.; the cost of the maintenance and repair of the buildings, equipment, roads, sidewalks, etc.; the payment of all utilities, including electricity, heat, water, telephone, and sewer service; insurance premiums or cost of insurance, legal expenses, together with any and all other expenses incurred by LHS Management Company in the operation and management of the Facility. This provision is not intended as a limitation on the party's obligation of indemnification provided in Section 17. 3 2.4 Subject to the general supervision of and fiscal policy decisions by the Borough, LHS Management Company shall have the authority and power as the Borough's agent to select, hire, fix the compensation of,discharge and direct the activities of all personnel; to establish all accounting, bookkeeping, record keeping and reporting activities; to contract with independent providers of equipment, supplies and services; to effect the purchase and control the disposition of all supplies and services; to deal with third party payors and appropriate government authorities; to collect (if necessary), using legal counsel, when due all charges receivable of the Facility (whether from patients, third party payors or others) in connection with the operation of the Facility. All equipment purchases shall meet the purchasing policies under the Borough Ordinance Code. 2.5 LHS Management Company shall cause the Facility to be maintained and repaired in accordance with all state and local codes, and keep the Facility in a condition at all times acceptable to the Borough, including but not limited to cleaning, painting, decorating, plumbing, carpentry, grounds care and such other maintenance and repair work as may be necessary, subject to any limitations imposed by the Borough in addition to those contained herein. Incident thereto, the following provisions shall apply: A. Special attention shall be given to preventive maintenance. To the extent feasible the services of regular maintenance employees shall be used. All costs associated with maintenance and repair of the building and equipment shall be considered an operating expense of the Facility and shall be paid for with Facility funds. H B. Notwithstanding any of the foregoing provisions, the prior approval of the Borough shall be required to approve and pay or any expenditure which exceeds50�one instance for labor, materials or otherwise in connection with the maintenance and repair of the Facility except for recurring expenses within the limits of the operating budget or emergency repairs involving manifest danger to persons or property, or required to avoid suspension of any necessary service to the Facility or to comply with requirements of any governmental body having any jurisdiction over the Facility. In the latter event, LHS Management Company shall inform the Borough of the facts justifying the expenditure without approval as soon as possible. Major maintenance items that cost more than $10,000 shall be referred to Borough for repair. 3. RECORDS AND REPORTS In addition to any other provisions of this agreement, LHS Management Company shall have the following responsibilities with respect to reports and records: A. LHS Management Company shall establish and maintain for the Facility a comprehensive system of records, books and accounts in a manner conforming to all applicable third party payors and otherwise satisfactory to the Borough. All records, books and accounts will be subject to examination at reasonable hours by any authorized representative of the Borough. The patient account records and all other books and records shall be maintained in the Administrator's office at the address of the Facility. 5 B. LHS Management Company shall furnish such information including all reports as may be reasonably requested by the Borough from time -to - time with respect tote financial, physical or operational condition of the Facility. 4. ADVISORY BOARD RESPONSIBILITIES It is understood that an Advisory Board will be appointed by the Borough and function as liaison between the Borough, Kodiak Island Hospital and Care Center, Medical Staff, and LHS Management Company, and shall be responsive to the concerns of the community regarding the operation of the Hospital. Specifically the duties and responsibilities of the Advisory Board include the following: A. Recommending Facility policy. Policies will be initiated by LHS Management Company or the Advisory Board; but all require review by the Advisory Board of the Facility. A policy is defined as a definite course of action as pursued by administration. B. Review any new patient care services. C. Review appointments and clinical privileges to the Medical Staff or members which have been recommended for approval by the Medical Staff in accordance with its Medical Staff bylaws, rules and regulations and forward the recommendation of the Medical Staff to the Lutheran Health Systems Board of Directors for review and final action. D. Review and recommend to the Borough for approval, operating and capital budgets prepared by the Facility. 0 E. Review and recommend to the Borough for approval, rate and charge structures in the Facility. F. Review and make recommendations concerning the quality of care rendered to the patients of the Facility. G. Review any reports prepared by LHS Management Company. H. Review any unbudgeted or capital expenditure item over $5,000. Cooperate with LHS Management Company in meeting the requirements of any Federal or State Law or statutes in retaining the Facility license; in obtaining or retaining accreditation from Joint Commission on Accreditation of Healthcare Organizations if desired by the Borough and in maintaining the requirement for participation under the Medicare/Medicaid Maternal and Child Health, other government programs and Blue Cross/Blue Shield. J. Review personnel policies and employees salary scales and benefits outlined by LHS Management Company. K. To assist the Administrator in long range planning for the Facility. L. To meet on a regular basis to consider reports and recommendations from the administrator and to make recommendations within a reasonable amount of time. 7 M. To assist LHS Management Company in reviewing administrator applicants and recommend a candidate to LHS Management Company prior to the appointment othe Administrator by LHb Management Company. N. To assist LHS Management Company in determining and deciding all matters of policy relating to the public relations of the Facility and the relationship of the Facility to the community and the surrounding area which it serves. O. Review and approve amendments to the Medical Staff bylaws. 5. BOROUGH RESPONSIBILITIES Specifically the duties and responsibilities of the Borough shall include the following: A. Approve on an annual basis a capital and operational budget for the Facility. B. Approve all rate and charge structure changes in the Facility. C. Approve unbudgeted or capital expenditure item over $5,000. D. Approve any new service to be offered at the Facility. E. Approve any and all physical plant modifications, alterations and or additions. F. Provide necessary major maintenance construction which costs in excess of $10,000. i:3 G. Respond to any LHS Management Company request within 60 days. H. Review a ica to yaws, rules and regulations and amendments thereto. 6. LHS MANAGEMENT COMPANY RESPONSIBILITIES LHS Management Company shall keep the Advisory Board updated with respect to matters of Facility policy and the relationship of the Facility to the community and the surrounding areas which it serves. LHS Management Company shall perform the functions described in this Agreement in accordance with the policies and directives adopted by the Borough. Specifically LHS Management Company duties and responsibilities shall include: A. LHS Management Company shall during the term of this agreement employ a qualified Administrator who will be interviewed and recommended by the Advisory Board prior to his/her appointment. He/She will be the Administrator of the Facility and will remain an employee of LHS Management Company. During the term of this agreement a Finance Director shall be employed. The Finance Director shall be an employee of LHS Management Company, reporting directly to the Administrator, and indirectly to the Finance Director of LHS Management Company. In the event that the incumbent Administrator accepts a position in another LHS facility, LHSMC will require that the Administrator serve out a 60 day notice period before departing from KIH/CC. If the 0 incumbent Administrator resigns from LHS, LHSMC will require a 30 day notice period before departing, unless a regular replacement can e found sooner. Before any interim Administrator or Finance Director is placed in the Facility, LHSMC will seek approval from the Borough. Approval shall include agreement to pay the salary, transportation and reasonable living expenses for the interviews. LHSMC shall bear the cost of any search and orientation expenses for interviewing Administrators and Finance Directors. B. Lutheran Health Systems Board of Directors shall appoint members to the Medical Staff of the Facility. Any physician, surgeon, or dentist licensed to practice his or her profession in the State of Alaska and having made application for appointment to the Medical Staff of the Facility, and such application having been recommended for approval by the Credentials Committee of the Medical Staff and having been thereafter approved by the Board of Directors of Lutheran Health Systems, shall be permitted to practice in the Facility. The Board of Directors of Lutheran Health Systems shall in all instances determine who may or may not be appointed to the Medical Staff and may for good cause limit or deny any physician, surgeon, or dentist the privilege to practice in the Facility, with or without the recommendation of the Credentials Committee of the Medical Staff, provided such action by the Board of Directors of Lutheran Health Systems is in accordance with the bylaws, rules and regulations governing the Medical Staff and Lutheran Health Systems. In making appointments to the Medical Staff or in limiting or denying physicians, surgeons, or dentists the privilege to practice in the Facility, the Board 10 of Directors of LHS, the Credentials Committee, and the appropriate Medical Staff committee shall at all times comply with all Federal and - --- tatteelaws and shall afford all applicants and members of the Medical Staff due process of law. All costs associated with Medical Staff hearings or appeals, arising out of decisions made by the Board of Directors of Lutheran Health Systems regarding the credentialing, privileging, or peer review processes, shall be paid with Facility funds, with the exception of those involving gross negligence or bad faith pertaining to appointments or reappointments to the Medical Staff, grants, denials, revocations, suspensions or limitations of Medical Staff membership or clinical privileges, or any forms of corrective action regarding applicants to, or members of the Medical Staff of Kodiak Island Hospital and Care Center. It is understood that the Borough shall review Medical Staff bylaws, rules and regulations, or policies for the Hospital which shall not be in conflict with the standards of the Joint Commission on Accreditation of Healthcare Organizations pertaining to Medical Staff credentials review and privilege delineation. C. LHS Management Company agrees that it will take all reasonable steps necessary to keep the Facility fully licensed and the Advisory Board agrees to cooperate in such endeavors. 11 D. LHS Management Company will assist the Borough in obtaining or retaining, if appropriate, accreditation by the Joint Commission on _-Accreditation of Healthcare Urganizations it desiredby the Borough. E. LHS Management Company will comply with the conditions of participation for the Medicare program and meet the appropriate requirements of Medicaid, Champus, Blue Cross/Blue Shield and other third party reimbursement programs. F. LHS Management Company agrees to develop, maintain and update, as appropriate, rates and charges for the Facility including patient room charges, supplies, medications and special services. The charge structure is to be approved by the Borough. G. LHS Management Company will establish Quality Review mechanisms designed to meet the standards imposed by appropriate certifying agencies and to bring about a satisfactory standard of health care in accordance with the policies of the Facility and resources available to the Facility. These mechanisms will be developed in consultation with the Medical Staff. H. The Administrator shall be empowered to negotiate, enter into, terminate and administer on behalf of the Facility contracts for services by medical, paramedical and other persons or organizations for maintenance and repair of the Facility. 12 7. SERVICES PROVIDED BY LHS MANAGEMENT COMPANY UNDER THE MANAGEMENT CONTRACT Services provided under this agreement are included as Attachment 1. 8. MANAGEMENT FEE For its services in managing the Facility, LHS Management Company shall receive an annual management fee to be paid in 12 equal monthly installments on the 15th day of each month. This management fee is described in Attachment 1. As an additional incentive to continue to improve the financial performance of KIH/CC, the parties agree to apply there incentive payment/credit defined in Attachment 2. In addition to the management fee, the Facility shall reimburse LHS Management Company for the salary and benefits of the Administrator and Finance Director. The Administrator's and Finance Director's salaries are subject to review and adjustment each year by mutual consent of the parties. It is also understood that any travel expense or out-of-pocket recruitment costs that LHS Management Company incurs in recruiting a qualified administrator or finance director to the Facility, as well as any relocation costs, will be borne by the Facility and not by LHS Management Company. LHS Management Company shall not charge any professional recruitment fee for a replacement administrator or finance director during the term of this agreement. If however, this agreement is prematurely terminated by the Borough and either the administrator or finance director is retained at the Facility, a fee of $10,000 per individual will be assessed to the Borough. The fee will be reduced by 1/24 for every month the individual serves the hospital prior to termination of the contract. 13 9. INSURANCE LtiSManagem Company -during t e t�r—mofs agreement agrees to -- maintain comprehensive general liability, premises liability (including products liability) hospital professional liability (malpractice), worker's compensation and errors and omissions, fire and excess or extended coverage insurance in amounts that shall be approved by the Borough, which approval shall not be unreasonably withheld. The cost of obtaining the insurance referred to above including the premiums paid thereon, shall be paid by the Facility. The Administrator, LHS Management Company, its officers and employees of the Company's corporate office and the Borough will be named as additionally insured to the above policies. The insurance obtained pursuant to this section shall contain a provision that such insurance may not be canceled, terminated or materially modified for any reason including nonpayment of premiums without having first given 30 days written notice of such proposed action to the Borough. 10. TERM This agreement shall be for a period of 5 years commencing on May 15, 1993. An additional 5 year term shall be available to the Borough at the same terms and conditions as described herein unless amended by the consent of both parties. 11. OWNERSHIP AND USE OF EQUIPMENT AND SUPPLIES 11.1 Equioment. It is understood that all equipment located in and about the Facility property on the effective date of this agreement shall be made available to LHS Management Company to be used in the 14 operation of the Facility, although such equipment shall continue to be owned by the Borough and not by LHS Management Company. 11.2 Supplies. It is understood and agreed that the expendable supply inventory located in and about the Facility property, shall be in the possession of the LHS Management Company to be used by it in the operation and management of the Facility. Such supplies shall continue to be owned by the Borough and not by LHS Management Company. The replacement of such expendables shall be considered as an operating expense of the Facility. The Borough will provide major maintenance items in excess of $10,000 in the usual Borough financial process. 12. REPLACEMENT OF CAPITAL ITEMS The Facility shall, at its own expense, replace all property, improvements, fixtures, equipment and personal property used in and about the Facility premises. LHS Management Company shall have the responsibility of requesting the replacement of any of the foregoing property in the budgeting process. Should emergencies occur during the year that require expenditure of capital funds that are not budgeted, the Administrator shall present such requests to the Borough and the Borough shall approve such requests prior to the expenditure of capital funds. 13. CONFIDENTIALITY OF RECORDS LHS Management Company shall use its best efforts to protect the confidentiality of the records, including medical records of the Facility and shall comply with applicable federal, state and local laws and regulations relating to the records of the Facility. The medical records maintained at the 15 Facility shall be considered by the parties to belong to the Facility and shall remain on the premises under the supervision and control of LHS anagement Company as long as it is the Facility operator as provided for in this agreement. If LHS Management Company ceases at any time to be the Facility operator, the Facility shall retain all such medical records, but shall be required to preserve the same for such period of time as is required by statute or regulation in the State of Alaska and under the appropriate federal laws. After LHS Management Company ceases to be the Facility operator and so long as such medical records are preserved by the Facility as required above, LHS Management Company shall at all times be provided free and complete access to such medical records and may copy all or any part of the same for such purposes as are consistent with its prior duties and responsibilities as the Facility operator in connection with any investigation, proceedings or litigation in which LHS Management Company, its parent company or any affiliated companies may be involved or may become involved. 14. ASSIGNMENT AND SUBLEASING 14.1 Assignment. LHS Management Company shall not have the power to assign its rights or interests under this agreement without the prior written approval of the Borough if such assignment is to a company or subsidiary company of Lutheran Health Systems. Any other assignment would require written approval of the Borough. 14.2 Subleasing. LHS Management Company may not lease or sublease all or any part of the property it manages and operates unless the Borough first approves, in writing, such lease or sublease and such lease or sublease is in furtherance of the purposes of this agreement. 16 15. GOVERNMENTAL ACCESS TO BOOKS AND RECORDS The parties agree that the Borough and LHS Management Company shall retain and make available upon request for a period of four (4) years after the furnishing of such services as described in the management agreement, the agreement, and books, documents and records which are necessary to certify the nature and extent of the cost thereof when requested by the Secretary of Health and Human Services or the Comptroller General, or any of their duly authorized representatives. If Facility Representatives or LHS Management Company carries out any duties of this contract through a subcontract with a related organization, valued at $10,000 or more over a 12 -month period, the subcontract shall also provide that the Secretary of Health and Human Services or the Comptroller General may have access to the subcontract or the subcontractor's books, documents and records necessary to verify the costs of the subcontract for a period of four years after the services have been furnished. This provision relating to the retention and provision of documents is included because of the possible application of Section 1861 (01)(1) of the Social Security Act, as amended by Section 952 of Public Law 96-400 to this agreement. If this section should be found to be inapplicable, then this clause shall be deemed to be inoperative and without force and effort. 16. SEVERABILITY No provision of this agreement shall be effective which is in violation of any state or federal law or regulation or agreement pertaining to the Facility 17 heretofore entered into with any state or federal agency. Provided, however, if one or more provisions of this agreement are hereinafter determined to be invalid and unenforceable, this shall not operate to defeat or invalidate the remainder of the agreement unless the unenforceability or invalidity has the effect of substantially changing the terms and conditions of this agreement or operates in such a manner as to invalidate or defeat the primary purposes or objectives of this agreement. 17. INDEMNIFICATION AND NONASSUMPTION OF LIABILITIES A. Each party shall defend, indemnify, save and hold harmless the other party, from and against any and all claims, demands, causes of action, suits, losses, costs, judgments and/or damages of any kind or nature, whether known or unknown, disclosed or undisclosed, including reasonable attorney's fees, arising out of or in connection with or in any manner related to the indemnifying party's performance of its obligations under the terms of this agreement. B. This indemnity includes any claims arising out of or in connection with or in any manner related to the LHS performance of its obligations under the terms of this agreement to provide for: personnel management decisions; the credentialing, privileging or peer review process; and the day-to-day management of the facility. C. Neither party shall, by entering into and performing its duties under this agreement, become liable for any of the existing or future obligations, liabilities, or debts of the other party. 18. GIFTS In the event that the contributions of money or property are made to LHS Management Company for the purchase of equipment or other articles lW-' specifically for use or location within the Facility, LHS Management Company may accept such gifts, it being understood, however, that LHS Management Company shall comply with the wishes of the donor and that all items purchased with such gifts by LHS Management Company shall be and remain a part of the Facility and the property of the Borough, except that should the terms or conditions of the gift, bequest, contribution or grant contain specific stipulations, restrictions or directions pertaining to its use or that the gift or donation is intended for LHS Management Company, then and in such event, there shall be strict compliance with the terms, instructions and wishes of the donor. 19. TERMINATION OF MANAGEMENT AGREEMENT Either of the parties hereto named, may terminate this agreement by giving the other party one hundred eighty (180) days notice in writing, sent by certified mail, return receipt requested, or personally delivered. 20. ACTIONS UPON TERMINATION On or before the termination date of this agreement, all items specified in Section 8 shall first be paid by the Borough to LHS Management Company which are accrued up to the date of termination. If said funds are not paid on or before said termination date, interest at the maximum rate allowable by law shall commence and be due LHS Management Company. 20.1 The custody of all Facility records, including X-rays, relating to Patients treated in the Facility shall be turned over by LHS Management Company to the Borough upon the termination date. However, the provisions of this agreement under Section 13 are not hereby waived. The payment of outstanding funds is not a condition of the release of the Facility records. W61 20.2 In the event of termination, both parties agree to provide assistance for an orderly transition. 21. SURRENDER ON TERMINATION LHS Management Company, upon termination of this agreement pursuant to the provisions hereof shall quit, surrender and return to the Borough possession of all the equipment, furnishings and other physical properties, including Facility supplies, then on hand at the termination date. 22. MISCELLANEOUS PROVISIONS A. Notices. Any notice or other communication by either party to the other shall be in writing and shall be given, and be deemed to have been duly given, if either delivered personally, or mailed postage prepaid, by certified mail, addressed as follows: If to Facility: Borough Mayor Kodiak Island Borough 710 Mill Bay Road Kodiak, AK 99615-6340 If to LHS Management Company: Sr. Vice President, LHS Management Company 1202 Westrac Drive, P.O. Box 6200 Fargo, NO 58106-6200 Or other such address, and to the attention of such other person or officers as either party may designate in writing. B. Modification and Changes. This agreement may be changed or modified by a written amendment, signed by the parties, which shall be attached hereto. 20 C. Understandings and Agreement. This agreement constitutes all of the understandings and agreements of whatsoever nature or kind existing between the parties with respect to the Facility and supersedes and hereto This agreement may be executed in an original and one or more counterparts, each of which is to be deemed an original. D. Headings. The headings contained herein are for convenience of reference only and are not intended to define, limit or describe the scope or intent of any provisions of this agreement. E. Governina Law. This agreement shall be deemed to have been made and shall be construed and interpreted in accordance with the laws of the State of Alaska. F. Attorney's Fees. If either party hereto brings an action because of any claims of breach or default hereunder, the nonprevailing party agrees to pay costs and reasonable attorney's fees incurred by the prevailing party in connection with action, as provided by the Alaska rules of civil procedure. IN WITNESS WHEREOF, the parties hereto have set their hands as of the date first hereinabove set forth and have executed this agreement in an original and original counterparts. LHS Management Company a Division of Lutheran Health Systems By Sr. Vice Preside Kodiak Island Borough By Borg gh Mayor i!k- 21 1 LUTHERAN HEALTH SYSTEMS SUMMARY AND COST OF MANAGEMENT SERVICES KODIAK ISLAND HOSPITAL AND CARE CENTER SUMMARY AND COST OF MANAGEMENT SERVICES The following summarizes the cost of the management contract services and clearly identifies which services discussed in this proposal are included under the Base Management Fee and which services are available separately through Lutheran Health Systems Management Company. The Base Management Fee includes all travel expenses and out-of-pocket expenses, except where noted. Year 1 Base Management Fee Year 2 Base Management Fee Year 3 Base Management Fee Year 4 Base Management Fee Year 5 Base Management Fee $156,564 Increase will not exceed 5% of Year 1 Base Management Fee Increase will not exceed 5% of Year 2 Base Management Fee Increase will not exceed 5% of Year 3 Base Management Fee Increase will not exceed 5% of Year 4 Base Management Fee Salaries and actual benefit costs for the Administrator and the Finance Director are not included in Base Management Fee. Any changes in salary or benefits for the Administrator or Finance Director shall be approved prior to implementation. They are billed monthly as incurred. 1 I. DAILY OPERATIONS o Maintain physical plant and property. Included in Base Management Fee o Pay all operating expenses from facility funds. Included in Base Management Fee o Recruit, hire and process payroll for all KIH&CC staff. Included in Base Management Fee o Process payroll for employees of LHS Management Included in Base Company stationed at KIH&CC. Management Fee o Operate the hospital in compliance with the bylaws Included in Base of KIH&CC, laws and licensure requirements of the Management Fee State of Alaska and certification requirements of Medicare, Medicaid, HCFA and Borough ordinances. o Contribute to the hospital's insurance trust annually Included in Base using operating funds, administer the trust and Management Fee monitor and present an annual report on its performance. o Produce annual budgets and financial statements in Included in Base accordance with generally accepted accounting Management Fee principals. Implement the recommendations of Borough auditors. o Track and report utilization and financial performance Included in Base on a monthly basis using side-by-side format. Management Fee o Maintain appropriate levels of insurance coverage for Included in Base medical liability, administrative liability and property Management Fee and plant using facility operating funds. o Maintain and update, as needed, all facility and Included in Base medical staff bylaws as well as patient care and Management Fee personnel policies. 701 o Ensure KIH&CC administrative team will participate in Included in Base State_ hospital nursing and heafth, cam financier management associations. o Set charges in a manner that are competitive within Included in Base the State of Alaska and are generally comparable to Management Fee the rates charged by hospitals of a similar type and size in the State of Washington. o Provide the Advisory Board monthly written and oral Included in Base summaries regarding the operation and financial Management Fee performance of KIH&CC. o Provide Patient Information Control System (PICS) Estimated total cost data processing system lease, maintenance and $800/month support including all upgrades and materials management module. 3 II. CONSULTATIVE SUPPORT o Provide a Qualified Administrator Salary and actual benefits not included in Base Management Fee. If required, relocation costs not included in Base Management Fee o Provide Interim Administrator Salary and actual benefits plus actual living expenses not included in Base Management Fee o Provide a Qualified Finance Director Salary and actual benefits not included in Base Management Fee. If required, relocation costs not included in Base Management Fee o Monitor Performance of Administrator and Finance Included in Base Director Management Fee o Provide consultation and Assistance to the Included in Base Administrator, Finance Director, Department Heads, Management Fee and Advisory Board as follows: - Operations staff will visit facility at least 5 times Included in Base per year with an Operations report rendered to Management Fee Advisory Board. Finance staff will visit facility at least 2 times Included in Base per year with a Financial evaluation report Management Fee rendered to Advisory Board. 11 1 4 Provide unlimited telephone consultation to the Provide electronic mail capability to facility connecting the facility to the Central Office and other LHS facilities Provide unlimited consultation on site and/or by telephone in the following areas: ` Legal ` Medical Legal ` Reimbursement ` Personnel / Human Resources ` Risk Management ` Quality Assurance ` Data Processing ` Finance / Accounting ` Business Office ` Specific Department Consultation ` Innovation ` Public Relations ` Marketing ` Aging Services ` Materials Management o Provide 3 educational sessions to Advisory Board members annually. 5 Included in Base Facility will pay no telephone charges because of the use of the 1-800# Included in Base Management Fee Included in Base Management Fee. If located outside Borough, travel expenses for the Board, Adminis- trator, Finance Director and other facility staff involved, not included. o Provide a strategic plan coordinated with the capital I Included in Base o Assist in preparation of the Facility's annual budget. Included in Base Management Fee o Assist in public relations and marketing. Included in Base Management Fee o Assist in maintaining, upgrading and networking Included in Base information systems. Management Fee o �[ Assist with labor activity as needed, including Included in Base negotiation of the labor contract with AMEA. Management Fee, expectfor occasional labor attorney costs o Assist with facility remodeling and expansion Included in Base projects. Management Fee o Obtain discounted purchasing agreements on behalf Included in Base of KIH&CC. Management Fee o Assist in materials management activities. Included in Base Management Fee o Provide at least 3 educational sessions for KIH&CC Included in Base department managers. I Management Fee III. MEDICAL STAFF SERVICES ing Included in Base =forpurpose e of Management Fee uesaling o Recruitment of $10,000 per placement Not included in Base physician Management Fee. Does not include expenses for interview, site visits, or moving expenses o Locum Tenens Actual cost for salaries Not included in Base Physicians and expenses Management Fee o Physician Practice 3 physician practice Additional Practice Management evaluations included in Management Evaluation Base Management Fee Evaluations. Not included in Base Management Fee o Physician Service $3,500 one time set up Not included in Base Bureau charge. $2.65/patient Management Fee visit, monthly system charge of $40.00 plus cost of actual supplies o Physician Educational Included in Base Seminar on RBRVS Management Fee o Physician Practice Actual cost of providing Not included in Base Management service Management Fee 7 IV. NURSING SERVICES o Assistance in recruitment of Nurses to include Director of Nurses if recruitment is necessary. Included in Base Management Fee o Assistance in reviewing and assisting with nursing Included in Base productivity. Management Fee o Management guidance to Directors of Nurses and Included in Base Nursing Department Managers. Management Fee o Assistance in developing a nurse credentialing Included in Base program. Management Fee F7 V. OTHER SERVICES o Administrator Educational Programs Participation and Registration Included in Base Management Fee. Travel expenses not included in Base Management Fee o Finance Director Educational Programs Participation and Registration Included in Base Management Fee. Travel expenses not ' included in Base Management Fee o Director of Nursing Educational Programs Participation and Registration Included in Base Management Fee. Travel expenses not included in Base Management Fee o Advisory Board Educational Programs Participation and Registration Included in Base Management Fee. Travel expenses not included in Base Management Fee o Tele -conferences (Telenet) Included in Base Cost of telephone line not included. Estimate of $30/tele-conference o Risk Management / Quality Assurance Conference Participation and Educational Programs Registration Included in Base Management Fee. Travel expenses not included in Base Management Fee o Materials Management Educational Programs Participation and Registration Included in Base Management Fee. Travel expenses not included in Base Management Fee o Access to Management Educational Programs Included in Base including: Intouch, Interact, I -Caps, and TIPS Management Fee Cost of books and supplies not included in Base Management Fee o Access to LHS Video Library Included in Base Management Fee 10 z INCENTIVE PAYMENT/CREDITS Attachment 2 KODIAK_I$HASpTAI AND PARC CENTER INCENTIVE PAYMENT/CREDIT INCOME FROM OPERATION BASE FEE INCENTIV $142,564 CREDIT Below budget by more than 5% $156,564 - $12,OOC Below budget by more than 4% 156,564 - 7,000 Below budget by more than 3% 156,564 - 51000 Below budget by more than 2% 156,564 - 3,000 Below budget by more than 1 % 156,564 - 2,000 Equal to Budget 156,564 p_ Budget exceeded by 1% 156,564 2,000 Budget exceeded by 2% 156,564 3,000 Budget exceeded by 3°A 156,564 5,000 Budget exceeded by 4% 156,564 7,000 Budget exceeded by 5% or more 156,564 12,000 Income from operations is defined as net patient service revenue plus other operating revenue minus operating expenses. It does not include any revenue sharing funds provided by the Borough. The incentive structure shall be inoperative if the Borough fails to approve reasonable rate increases for Patient services or prevents implementation of reasonable cost reduction measures recommended by LHS Management Company. If either condition exists, the Borough shall pay the base management fee even if a below budget condition is experienced. E/ TOTAL MANAGEMENT FEE $142,564 148,564 151,564 153,564 154,564 156,564 158,564 159,564 161,564 163,564 168,564 The incentive shall be due in a lump sum following receipt of the audited financial statement. If the audited statements indicate that a credit is due to the Borough, LHSMC shall deduct if from the next month's regular management fee as a credit.