FY2010-35 Providence Hospital - Letter of Intent - Development and Operation of a Long Term Care Facility&A"t -* q,�Ole v�
Providence Kodiak Island Medical Center
Hospital Administration
1915 East Rezanof Drive
Kodiak, AK 99615
t: 907.486.9595
f: 907.486.2336
www.providence.org
tPROVIDENCE
Kodiak Island
Medical Center
May 25, 2010
Kodiak Island Borough
710 Mill Bay Road
Kodiak, AK 99615
Re: Letter of Intent
Dear Mr. Gifford:
The purpose of this letter of intent is to set forth the basic terms and conditions upon which
Providence Health & Services — Washington dba Providence Kodiak Island Medical Center
("Providence") and the Kodiak Island Borough ("The KIB") will collaborate on development
and operation of a new long term care ("LTC") facility on Kodiak Island.
A. Preamble.
1. The KIB and Providence both agree the current LTC facility on Kodiak Island needs to
be replaced.
2. The KIB is the owner of the Hospital and LTC facilities on Kodiak Island.
3. The KIB leases the Hospital and LTC facilities to Providence and this lease agreement is
dated, April 21, 1997.
4. The KIB agrees that if and when a new LTC facility is constructed, the new LTC facility
would be owned by the KIB and the KIB is responsible for any related indebtedness.
5. The KIB Assembly has approved beginning the LTC facility replacement planning
process and appropriated $85K for initial funding.
6. The KIB and PKIMC have agreed to work together during planning process.
7. The KIB and PKIMC have appointed two committees to assist in the planning process;
Executive Steering Committee ESC (Borough Manager, PKIMC CEO, Project Planning
Officer, LTC Manager) and the Community Advisory Council CAC (representative
community members).
B. The KIB Responsibilities.
1. The replacement of the LTC facility is the responsibility of the KIB which includes all
aspects of construction and financing of the project.
2. The KIB agrees to participate on the LTC Community Advisory Council (CAC) and the
LTC Executive Steering Committee (ESC).
3. The KIB will establish a project milestone list and identify key KIB Manager/Assembly
decision points.
4. The KIB agrees to provide funding for the preplanning costs, if available, for the LTC
project including but not limited to the financial feasibility and Certificate of Need
(CON).
5. The KIB agrees to provide funding, if available, for the schematic design phase of the
LTC facility.
6. The KIB agrees to provide funding, if available, for the design development phase; the
construction document phase; the bidding and negotiation phase and the construction
phase of the LTC project.
7. Provided that Providence has obtained in writing the KIB's advance approval, the KIB
agrees to reimburse Providence for any planning costs associated with the LTC project.
C. Providence Responsibilities.
1. Providence is responsible for the operation of the LTC facility.
2. Providence agrees to participate on the LTC Community Advisory Council and the LTC
Executive Steering Committee.
3. Providence agrees to advise and consult with respect to the planning activities including
but not limited to the financial feasibility and CON process.
4. Providence agrees to use its operational knowledge and expertise with respect to the
appropriate design of LTC facility and provide the CAC, ESC, and KIB with design
options and recommendations.
5. Providence agrees to share its summary of existing community needs data and historic
LTC residential statistics with the KIB.
6. Providence agrees to provide in-kind administrative support services and a project
planning coordinator for the pre -construction phase.
7. Providence agrees to obtain a LTC Facility financial pro -forma analysis and a State of
Alaska Certificate of Need determination.
8. Providence agrees that it must obtain in writing the KIB's approval before it seeks
reimbursement for any out-of-pocket expenditures.
D. Terms.
1. The KIB will always have the right of approval at key milestones during the planning and
construction phase of the new LTC project.
2. Provided that Providence has obtained in writing the KIB's advance approval, the KIB
will reimburse Providence for any planning costs incurred by Providence.
3. If a new LTC facility is constructed, the KIB and Providence will consider the following
amendments (among others which may arise depending on the location of the LTC) to the
current lease agreement (the Definitive Agreements):
a. Negotiate a new lease payment in recognition of the additional reimbursement
from the State of Alaska for the increased capital costs of the new LTC facility. It
is anticipated that the increased lease payment resulting from an increase in the
capital portion of the LTC rate from the State of Alaska will be sufficient to
amortize the KIB debt associated with the facility.
b. The KIB agrees to supplement any additional costs of operation of the new LTC
facility between the date of opening and the date of execution of the next State of
Alaska's rebased reimbursement calculation. Depending upon the timing of the
project, there may be 1 to 3 years where the additional cost of operating
(excluding the capital costs) the new LTC facility exceeds to LTC rate from the
State of Alaska.
E. Publicity.
Except as required by law, neither party shall make any public announcement with
respect to the transactions and arrangements proposed by this letter of intent or any other
related matters without the express written consent of the other party.
F. Tenn.
This Letter of Intent will expire at the earlier of (a) December 31, 2014 or (b) the
execution of a new lease between KIB and PKIMC.
If the proposal set forth in this letter of intent is acceptable, we request that you sign, date and
return to us the enclosed copy of this letter of intent. This letter of intent may be executed in
counterparts, all of which together shall constitute one and the same agreement.
Accepted nd agreed to
this �Z� day of ACA, 02 (J / o
Providence Health & Services — Washington dba
Providence Kodiak Island Medical Center
Donald J. Rush
Chief Executivefacer
The Kodiak Island Borough
Name:
Title: Manager
Key contact people:
Rick Gifford, KIB Manager;
Don Rush, PKIMC CEO;
Jimmy Ng, Project Planning Officer
ilor a v� er, �pro j� Clerk