1997-07 Providence Lease - Kodiak Hospital and Care CenterKODIAK ISLAND BOROUGH
RESOLUTION NO. 97 -07
Introduced by: Mayor Selby
Requested by: Mayor Selby
Drafted: Borough Attorney
Introduced: 02/20/97
Public Hearing: 02/20/97
Amended: 02/20/97
Adopted: 02/20/97
A RESOLUTION BETWEEN THE KODIAK ISLAND BOROUGH AND
SISTERS OF PROVIDENCE IN WASHINGTON D /B /A PROVIDENCE
HEALTH CARE SYSTEM IN ALASKA FOR LEASE OF THE
KODIAK ISLAND HOSPITAL AND CARE CENTER
WHEREAS, the Kodiak Island Borough (hereinafter referred to as 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 the Kodiak Island Hospital and Care Center (hereinafter referred
to as the "Hospital "); and
WHEREAS, the Borough, in the interests of sound fiscal management and to ensure
the continued operation of the Hospital in a professional and efficient manner, has
requested Providence Health System in Alaska (hereinafter referred to as
"Providence"), a Washington non - profit corporation, to lease and operate the Hospital;
and
WHEREAS, Providence owns and operates a number of health care facilities that are
operated in keeping with its philosophy, mission and values; and
WHEREAS, Providence desires to lease the premises and the equipment from the
Borough subject to the terms and conditions contained in the "Lease Agreement" that
has been approved by both parties subject to approval by the assembly; and
WHEREAS, the assembly is authorized by the provisions of the Kodiak Island
Borough Code of Ordinances 18.40.020 to approve, by resolution, a negotiated lease
for a period not to exceed twenty -five (25) years to any non - profit corporation;
NOW, THEREFORE, BE IT RESOLVED BY THE ASSEMBLY OF THE KODIAK ISLAND
BOROUGH that:
Kodiak Island Borough, Alaska Resolution No. 97 -07
Page 1 of 2
Section 1: The lease of the Kodiak Island Hospital and Care Center to the Sisters
of Providence in Washington d /b /a Providence Health System in Alaska
is hereby approved on the terms and conditions of the Lease Agreement.
Section 2: The mayor, or his designee, is authorized to execute the Lease
Agreement and all other documents required for the completion of this
transaction.
ATTEST:
ADOPTED BY THE ASSEMBLY OF THE KODIAK ISLAND BOROUGH
THIS TWENTIETH DAY OF FEBRUARY, 1997
KODIAK ISLAND BOROUGH
Je o ne M. Selby, Borough May .0r
J
Donna F. Smith, CMC/AAE, rough Clerk
/
Robin Heinrichs, Presiding Officer
Kodiak Island Borough, Alaska Resolution No. 97 -07
Page 2 of 2
LEASE AGREEMENT
THIS AGREEMENT is made and entered into by and between the KODIAK ISLAND
BOROUGH, a municipal corporation of the State of Alaska (hereinafter referred to
as "KIB "), and SISTERS OF PROVIDENCE IN WASHINGTON d /b /a PROVIDENCE
HEALTH SYSTEM IN ALASKA, a Washington non - profit corporation (hereinafter referred
to as "Providence ").
WITNESSETH:
WHEREAS, KIB 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 the 'Hospital');
WHEREAS, the Borough, in the interests of sound fiscal management and to ensure
the continued operation of the Hospital in a professional and efficient manner, has
requested Providence to lease and operate the Hospital;
WHEREAS, Providence owns and operates a number of health care facilities, that
are operated in keeping with its philosophy, mission and values; and
WHEREAS, Providence desires to lease the Premises and the Equipment from
KIB, subject to the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and each of the parties intending to be legally bound hereby, it is mutually agreed as
follows:
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1.1 AGREEMENT TO LEASE: KIB agrees to lease to Providence and
Providence agrees to take from KIB, the Premises and Equipment described herein, for
the term and upon the terms and conditions set forth in this Agreement.
2.1 PREMISES: The real estate which is the subject matter of this Agreement is
described as follows:
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Lot Two -A (2 -A) Hospital Subdivision according to Plat 95 -03,
located in the Kodiak Recording District, Third Judicial District,
State of Alaska.
including all buildings, appurtenances, and improvements thereto, (herein referred to as
"Premises"). KIB is in the process of remodeling the current hospital facility, pursuant to
architectural drawings which have been provided to Providence. In addition, KIB intends
to relocate certain services to the new hospital facility. The parties acknowledge that KIB,
by a target date of June 30, 1997, intends to complete the remodeling of the old facility
in accordance with such architectural drawings and transfer certain services to the new
facility which collectively shall be referred to as the Premises herein. KIB shall be solely
responsible for all financial costs associated with the remodel of the old facility and
transitional costs to the new hospital facility.
3.1 EQUIPMENT: The Equipment which is the subject matter of this Agreement
is all of the Equipment presently located in or on the Premises, in an "as is" condition, and
all Equipment to be acquired during the term of this Agreement. The 1991 Champion
Coach 18 passenger bus presently used in connection with the extended care facility will
be included with the Equipment, but it may be later withdrawn by KIB, without obligation,
to be used for a public transit system.
3.2 KIB agrees to provide a minimum of $150,000 per year for purchase of new
and replacement Equipment for the Hospital. KIB will purchase a CT Scan when that
purchase becomes necessary and other major items will be discussed. The funds for
purchase may be provided by the Fern Fuller Estate and Charitable Remainder Unitrust,
revenue sharing or legislative grant funds provided by the State of Alaska to KIB, or other
capital funds provided by KIB. Any Equipment purchased with funds from KIB will remain
the property of KIB at the termination of this Agreement.
3.3 Providence may purchase additional equipment to be used in the
maintenance or improvement of the Hospital's operations. Such additional equipment shall
be Providence's property, and shall be tagged as such. Upon termination or expiration of
this Agreement, KIB may purchase any items of equipment used in the Hospital and paid
for by Providence. The purchase price shall be the market value of the acquired
equipment less an amount equal to an allowance for depreciation of the equipment
between acquisition and termination calculated pursuant to generally accepted accounting
principles. Any equipment or personal property which belongs to Providence and is not
purchased by KIB may be removed by Providence after the termination or expiration of this
Agreement.
4.1 TERM OF AGREEMENT: The Premises and Equipment shall be leased to
Providence by KIB for a term of ten (10) years, commencing on April 21, 1997, through and
including April 20, 2007, unless sooner terminated as hereinafter provided.
4.2 Provided that Providence is not in default under this Lease Agreement,
Providence shall have the option to extend this Lease Agreement for one additional term
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of ten (10) years by providing KIB with 180 days prior written notice. The extended term
shall be on the same terms and conditions of this Lease Agreement with monthly lease
payments to be established by negotiation.
4.3 At the expiration of the term of this agreement or upon the termination of this
agreement as provided for herein, Providence shall surrender possession of the Premises
and Equipment to KIB as set forth under the terms of this Agreement.
5.1 FIRST RIGHT TO PURCHASE: KIB hereby gives and grants to Providence
the first right to purchase all of KIB'S interest in the Hospital, Premises, and Equipment at
any time from the date of this Agreement until the termination of this Agreement as
provided for herein. KIB shall make any sale of said interest in the Hospital, Premises and
Equipment between KIB and a third party conditioned upon and subject to Providence's
first right to purchase as set out herein. Providence shall have the right to accept the
purchase price and the terms of the intended sale to the third party as the terms and
conditions of the sale between KIB and Providence.
5.2 Providence may exercise its first right to purchase by executing within ninety
(90) days of notice of KIB'S intent to sell its interest in the Hospital, Premises and
Equipment an agreement for the purchase of said interest in the Hospital, Premises and
Equipment on terms and conditions as agreed between the parties. If Providence does not
exercise its first right to purchase as provided for herein or enter into a purchase with KIB
within ninety (90) days of the notice by KIB to Providence of its first right to purchase, then
and in that event Providence's first right to purchase shall lapse and KIB may sell the
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Hospital, Premises and Equipment or any part thereof to said third party or any other
parties.
6.1 MONTHLY LEASE PAYMENT SCHEDULE. The fixed minimum monthly
lease payment during the term of this Agreement shall be SIXTY THOUSAND DOLLARS
($60,000) payable by Tenant in equal monthly installments, on or before the first day of
each month in advance, at the office of KIB or at such other place designated by KIB,
without any prior demand therefor, and without any deduction or setoff whatsoever.
7.1 DOWN PAYMENT: Providence shall contemporaneously with the execution
of this agreement, deposit with KIB the sum of TWO MILLION DOLLARS ($2,000,000)
representing a down payment in consideration for the right to lease the Premises as set
forth This down payment is non - refundable (except to the extent that it may be
recovered from operations) and consequently may be used by KIB for the construction or
remodel of a portion of the Premises without the risk of any remaining claim by Providence.
Provided, however, that if KIB exercises the power of termination without cause as
provided in Section 37.1, then KIB will refund the sum of $200,000 per year for each year
remaining, at the time of termination, in the original ten -year term of this agreement.
8.1 HOSPITAL OPERATIONS: Providence shall be responsible for the total
operation of the Hospital. Providence shall operate the Hospital under the name
Providence Kodiak Island Medical Center. Except as otherwise stated herein, Providence
assumes all the rights, duties, liabilities and obligations which shall arise out of its
operation of the Hospital and other activities on the Premises during the term of this
Agreement. Providence shall cause all expenses incurred in operation of the Hospital
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after the effective dated of this Agreement to be paid, including, but not limited to, utilities,
insurance, salaries, supplies, fees, benefits and other costs normally incurred in the
operation of the Hospital.
8.2 All revenues and cash collections from patients, third -party payers and other
sources billed and collected by Providence, and arising out of or related to services
rendered during the term of this Agreement, shall be used to offset operating expenses
(which includes rent payments and a return of operations to Providence fix the $2 million
downpayment) and capital equipment purchases incurred (in excess of KIB contributions)
on or after the effective date of this Agreement. The excess, if any, of such revenues over
operating expenses and capital expenditures shall be divided on an equal basis between
Providence return on operations and KIB funded depreciation until each fund reaches a
maximum of $600,000 per year. The balance, if any, shall accrue to the sole financial
benefit of Hospital.
8.3 Providence shall maintain separate accounting records and financial
statements for the Hospital and shall provide KIB with the Hospital's year -end financial
statements. KIB recognizes that Providence may, at its discretion, change the fiscal year
of the Hospital to be aligned with Providence Health System.
8.4 Providence may conduct medical educational training programs at the
Hospital, induding training of intems and residents and other medical /technical personnel,
in a manner consistent with applicable governmental regulations.
8.5 Providence shall have access to all prior financial, business, medical and
other Hospital books and records, including, but not limited to, admitting register books,
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pricing schedules of the Kodiak Island Hospital and room services, patients' insurance
records, pertinent Hospital personnel records and such other books and records as are
necessary to the continued operation of the Hospital. Original copies of all such books
and records shall be maintained and stored in the Hospital at all times. No such books
and records may be destroyed without the consent of the KIB, and in no event will patient
medical records be destroyed, except in accordance with federal and state laws, rules and
regulations. KIB agrees to defend and hold Providence harmless against all claims,
liability and expense resulting from acts or omissions of KIB in connection with such books
and records and relating to the period prior to the effective date of this Agreement. KIB
shall continue to be liable for the performance of all agreements related to such books and
records not so assigned to Providence.
9.1 UTILITIES: Providence shall arrange and pay for all utilities and other
services to be furnished to the Premises, including gas, fuel, oil, electricity, sewer, water,
=telephone, and garbage collection. All utilities shall be prorated between the parties as
of the effective date of this Agreement.
9.2 KIB agrees to refund up to $200,000 of the down payment referenced in
section 7.1 to the extent that the utility expenses for the first year of operation under this
Lease Agreement exceed $520,000.
10.1 TAXES: Providence shall be responsible for and shall pay before
delinquency all govemmental taxes, assessments charges or liens assessed during the
term of this agreement against any leasehold interest or property of any kind or income or
sales of any kind related to the Premises. KIB acknowledges that Providence will be
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entitled to a property tax exemption for property used exclusively for non - profit hospital
purposes pursuant to AS 29.45.030(a)(3), except to the extent that the leasehold Premises
are used by non - exempt parties for their private business purposes as elaborated in
Greater Anchorage Area Borough v. Sisters of Charity, 553 P.2d 467 (Alaska 1976).
Providence may contest, by appropriate proceedings, any tax assessment, charge or lien,
but such contest shall not subject any part of the Premises or Equipment to forfeiture or
loss. Providence and KIB agree to negotiate in good faith regarding any KIB property
taxes levied or assessed on the Premises and Equipment owned by KIB and leased to
Providence, or any property owned by Providence during the term of this Agreement.
11.1 SUPPLIES: Providence shall take ownership of all the supplies maintained
at the Hospital at the commencement of this Lease Agreement. Providence shall supply
and maintain all expendable Hospital supplies as may be required in Providence's
discretion for the proper operation of the Hospital. Upon termination of this Agreement,
Providence will transfer ownership of all of the supplies maintained at the Hospital to KIB.
The value of the supplies provided by Providence at the termination of this Agreement
shall be equal to the value of the supplies transferred to Providence at the commencement
of this Agreement multiplied by a fraction the numerator of which is the Consumer Price
Index for all items for the area geographically nearest to Kodiak Alaska published by the
Bureau of Labor Statistics, United States Department of Labor, or if none, by any other
instrumentality of the United States or the State of Alaska for the area geographically
nearest to Kodiak, Alaska (the "CPI ") at the termination of the Lease, and the denominator
which is the CPI for the first full calendar month of the Lease term. If Providence does not
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transfer sufficient supplies under the formula in the previous sentence, then Providence
will pay the balance to KIB at the time of termination.
12.1 USE: Providence shall use and operate the Premises for a general acute
care hospital, extended care facility, home health care provider, retail pharmacy and for
any additional health care related purposes as may be appropriate. Providence shall
provide, equip and maintain adequate facilities for the continuation of full range general
medical and surgery services at not less than the level of the state of the art available
presently at the Hospital on April 21, 1997, or such greater level as economically feasible
and warranted by the local physicians' levels of ability and the reasonable needs of the
community, as determined in Providence's sole discretion and in accordance with the
terms and conditions as set forth in this Agreement. Providence may convert parts of the
Premises into use for other related purposes consistent with KIB's obligation to supply its
inhabitants with facilities for the care of sick and injured persons. Providence shall operate
and maintain a duly licensed Hospital under the Alaska Statutes and in accordance with
the standards prescribed by the Alaska Department of Health and Social Services.
13.1 QUIET ENJOYMENT: KIB warrants that Providence, upon paying the rent
and any other charges as provided for in this Agreement and upon performing all other
obligations herein, shall quietly have, hold and enjoy the Premises without hindrance.
14.1 WARRANTY OF TITLE: KIB hereby warrants that it has good and
marketable title to the Premises, subject only to the encumbrances and security interests
stated in Exhibit A, attached hereto and incorporated herein.
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15.1 PRIOR AGREEMENTS: KIB warrants that entering into this agreement
does not breach any commitments or responsibilities of KIB under prior agreements,
including but not limited to financing agreements, and that KIB shall defend and hold
providence harmless from any claims, liabilities and expenses arising from or in any way
related to any prior agreements of KIB except to the extent such agreements are assumed
by Providence.
16.1 BUILDING REGULATIONS: KIB warrants that there are no existing
violations of applicable building, fire and health code regulations of which it is aware. KIB
is responsible for all costs of correcting any existing violations of applicable building, fire
and health code regulations. Providence shall otherwise keep and maintain the Premises
in good condition.
17.1 CLOSING ACTIVITIES: KIB shall, at its expense, conduct an audit of the
hospital's financial statement as of April 20, 1997. The audit shall be performed according
to generally accepted accounting principles by an independent certified public accountant
approved by Providence
17.2 KIB shall, at its expense, prepare the Medicare cost report for the period
ending April 20, 1997, and repay or set aside any Medicare over payments pertaining to
such period or prior periods. Upon request, Providence will make a proposal to KIB for
preparation of the cost report.
18.1 CURRENT ASSETS AND CURRENT LIABILITIES: Providence will receive
from KIB at Closing current assets defined as accounts receivable, prepaids, and such
other current assets of the Hospital as identified in the audit provided under sections 17.1
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of this agreement.. Providence will retain and pay all Hospital liabilities, including,
accounts payable and accrued liabilities identified in the audit. KIB will retain and pay
non - current payables attributable to prior years cost reports related to governmental
payers, including those resulting from the filing of the termination cost reports of the
Hospital. The excess, if any, of current assets over current liabilities shall accrue to the
sole financial benefit of Providence to offset the Hospital operating losses.
18.2 Subject to this Agreement except as otherwise provided during the term of
this Agreement, KIB shall retain all liability for notes payable and other debts, however
characterized.
19.1 ACCREDITATION: Providence will use its best efforts (so long as it is in the
best interests of Providence and KIB) to cause the Hospital to become and remain
accredited by the Joint Commission on the Accreditation of Health Care Organizations.
Providence shall send to the KIB upon any loss of accreditation a written notice that the
Hospital is no longer accredited and the reasons for non - accreditation.
20.1 QUALIFICATION FOR MEDICARE AND MEDICAID: Providence will use its
best efforts (so long as it is in the mutual interests of KIB and Providence) to cause the
Hospital to remain fully qualified as a provider of services under the "Medicare" program,
"Medicaid" program, any program successor of either of the above or any other program
by Federal, State or local governments providing for the payment or reimbursement for
services rendered
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21.1 DISPOSAL OF MEDICAL WASTE AND /OR GARBAGE: Providence shall at
it's expense, properly and timely dispose of all medical waste and /or garbage refuse
according to any and all laws governing disposal of the same.
22.1 INSURANCE: Providence shall, at its expense, maintain throughout the term
of this Agreement the following insurance
A. Insurance against loss or damage by fire and such other risks as may be
included in the current KIB hazard insurance policy with extended coverage in an amount
not less than the replacement value of the Premises from time to time;
B. Insurance against claims for personal injury and property damage
occurring on the Premises under public liability and malpractice policies with limits of not
less than $1,000,000 per person, $3,000,000 per occurrence and $500,000 for property
damage arising out of any single occurrence.
Such insurance policies may provide for partial self- insurance under the same terms as
the policies for hospitals owned and operated by Providence. KIB shall be named as an
additional insured party on each such policy of insurance, and certificates thereof shall be
furnished to KIB.
22.2 Providence shall also provide tail coverage for hospital professional liability
for the KIB and LHS Management System by purchasing coverage with the current carrier
which provides coverage for all occurrences since 1987.
22.3 KIB shall, at its expense, maintain throughout the term of this Agreement
insurance to cover all conditions, events and liabilities arising out of its actions and
activities relating to the Hospital.
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23.1 MAINTENANCE AND REPAIRS: Providence shall cause the Hospital to be
maintained and repaired in accordance with all state and local codes, and keep the
Hospital in a condition at all times acceptable to KIB, including but not limited to cleaning,
painting, decorating, plumbing, carpentry, grounds care and such other maintenance and
repair work as may be necessary. KIB shall provide and pay for any major maintenance
and repairs in the amount of $10,000 or more.
KIB will set up and annually fund a Hospital Fund which shall be, used for major
repairs and maintenance of the premises and debt requirements. All funds generated from
this lease shall be allocated to the Hospital Fund.
If Providence, after written notification by KIB refuses or neglects to perform
maintenance and repairs within a reasonable period of time, and KIB is required to perform
maintenance or make repairs by reason of Providence's negligent acts or omissions, KIB
shall have the right, but shall not be obligated to perform such maintenance and repairs
on behalf of and for the account of Providence. In such event such work shall be paid for
by Providence as additional rent within fifteen (15) days after receipt of a bill from KIB.
24.1 CONDITION ON SURRENDER: Upon termination or expiration of this
Agreement, Providence shall surrender the Premises to KIB in substantially the same
condition as exists on the date hereof, except for reasonable wear and tear.
25.1 IMPROVEMENTS AND ALTERATIONS: Providence shall make no
alterations in, or additions or improvements to, the permanent structure of the Premises
without first obtaining the written consent of KIB. Any additions and improvements made
to the permanent structure of the Premises shall remain upon and be surrendered with
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such Premises as a part thereof at the expiration of the term of this Agreement, by lapse
of time or as otherwise provided herein.
26.1 CONTRIBUTIONS: In the event that contributions are made to Providence
for the benefit of the Hospital and /or KIB, the Providence may accept such contributions,
it being understood, however, that Providence shall comply with the wishes of the donor
insofar as they are compatible with the operation of the Hospital and that all property
purchased with such contributions shall be and remain a part of the Hospital and the
property of KIB. Should the terms or conditions of the contribution indicate that it is
intended for Providence and not for the Hospital or KIB, Providence shall accept the
contribution on its own behalf and utilize the funds in its sole discretion. For purposes of
this paragraph the term "contribution" shall include a gift, bequest, grant or donation of
money or property. It is expressly understood that the term "contribution" does not include
any money derived by, or from, taxes or other governmental funds or entities.
26.2 Providence, will identify for KIB in advance of purchase or expenditure, the
Equipment, project or repairs for which the contributions will be expended and provide to
KIB a full accounting of all expenditures.
26.3 The following contributions will remain under the ownership and control of
KIB or other local entities. The parties will cooperate to insure that these funds are
expended for the health care purposes for which they are established or provided.
A. The revenues of the Kodiak Island Health Care Foundation.
B. The Fern Fuller Estate and Charitable Remainder Unitrust.
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C. Any revenue sharing or legislative grant funds provided by the State of
Alaska to KIB.
27.1 MEDICAL STAFF: Any medical physician or osteopathic physician holding
an unlimited license or any appropriately licensed dentist, who is recommended for
approval by the Medical Staff and approved by the goveming board of Providence shall
be permitted privileges to practice in the Hospital. This section does not prohibit
Providence from entering into an exclusive contract for the practice of an anesthesiologist
or another specialist for the benefit of the community.
28.1 HOSPITAL STAFF: There is a full staff employed at the Hospital at the time
of this Agreement. Providence will use its best efforts to employ qualified members of the
present staff following the commencement of the lease term, subject to Providence's
general employment policies. Providence will use its best efforts to maintain the benefits
enjoyed by the present staff including employee bargaining units, seniority, wage
schedules and retirement benefits, subject to Providence's general employment policies.
Providence agrees to use its best efforts to make no reductions in budgeted staff for the
first six months of the Lease Agreement. To the extent consistent with Providence's
personnel policies and procedures, Providence will give its new employees credit for
vacation and sick leave benefits earned while employed by KIB.
29.1 ADMISSION TO HOSPITAL: All persons in need of hospitalization shall be
admitted to the Hospital without regard to race, creed, color, national origin or financial
circumstances.
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30.1 INDEMNIFICATION: Providence hereby agrees to indemnify and hold KIB
harmless from and against any and all claims and demands for injury or death to persons
and damage to property occurring on the Premises during the term hereof, and will defend
KIB from any claim of liability on account thereof. Providence shall have no obligation for,
and KIB shall indemnify and hold Providence harmless from and against, any and all
liability with respect to any claims resulting from the negligence of KIB or its agents or
employees, or any claims arising out of acts or omissions which occurred prior to the
effective date of this Agreement.
30.2 Providence shall indemnify, defend, and hold KIB harmless from and against
any and all claims, demands, damages, losses, liens, costs and expenses (including
attomey's fees and disbursements) which accrue to or are incurred by KIB arising directly
or indirectly from or out of or in any way connected with (1) any activities within the
Hospital or on the Premises during the term of this Agreement which directly or indirectly
resulted in the Premises being contaminated with Hazardous Substances; (2) the
discovery of Hazardous Substances on the Premises whose presence was caused during
the term of this Agreement; and (3) the clean -up of Hazardous Substances on the
Premises whose presence was caused during the term of this Agreement.
30.3 KIB shall indemnify, defend, and hold Providence harmless from and against
any and all claims, demands, damages, losses, liens, costs, and expenses (including
attomey's fees and disbursements) which accrue to or are incurred by Providence arising
directly or indirectly from or out of or in any way connected with (1) any activities within the
Hospital or on the Premises prior to the term of this Agreement which directly or indirectly
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resulted in the Hospital and /or the Premises being contaminated with Hazardous
Substances; (2) the discovery of Hazardous Substances on the Premises whose presence
was caused prior to the term of this Agreement; and (3) the clean -up of Hazardous
Substances on the Premises whose presence was caused prior to the term of this
Agreement.
31.1 ACCESS TO RECORDS: KIB and Providence further agree that Providence
shall retain and make available upon request for a period of four (4) years after the
furnishing of such services (operation of the Hospital) as described in this Agreement, the
books, documents and records which are necessary to certify the nature and extent of the
costs thereof when requested by the Secretary of Health and Human Services or the
Comptroller General, or any of their duly authorized representatives.
31.2 If Providence carries out any duties of this Agreement 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 and the subcontractor's books,
documents and records necessary to verify the costs of the subcontract for a period of four
(4) years after the services have been furnished.
31.3 This provision relating to the above retention and production of documents
is included because of possible application of Section 1861(v)(1)(I) of the Social Security
Act 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 effect.
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31.4 Should this Agreement terminate for any reason, Providence agrees to
provide to KIB all personnel records for those employees who are to be re- employed by
KIB who consent to the release of such records to KIB.
31.5 Except as otherwise provided herein in subparagraph 25.4, Providence
agrees to provide KIB with the books, documents and records, including medical records,
in regard to the operation of the Hospital.
31.6 Providence shall provide at no cost to KIB sufficient storage space for KIB
to store its existing books and records relating to the Hospital.
32.1 KIB TO APPROVE ADMINISTRATOR: Providence agrees to select and hire,
with KIB consultation, a competent chief executive officer for the Hospital to be known as
the Administrator. Providence shall conduct annual evaluations regarding the
Administrator in consultation with KIB. The Administrator shall attend meetings of the KIB
Hospital Advisory Board and KIB, representing Providence and reporting on the condition
and affairs of the Hospital. Providence agrees to provide reasonable support and
assistance to the Administrator to enable the Administrator to administer the business and
affairs of the Hospital in an efficient and business -like manner consistent with the needs
of the community.
32.2 Notwithstanding any other terms and conditions of this Agreement to the
contrary, in the event this Agreement is terminated prior to the expiration of its full term,
then Providence shall provide an Administrator for the Hospital on a contract basis for
ninety days following the termination if requested by KIB.
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33.1 KODIAK ISLAND HEALTH CARE FOUNDATION OFFICE SPACE:
Providence shall provide reasonable office space to Kodiak Island Health Care Foundation
for purposes of a foundation office. Providence agrees to pay the salary and reasonable
benefits for the Foundation director.
34.1 GOVERNANCE: The over all management and control of the Hospital will
rest with Providence Alaska Service Area Board. It is anticipated that two KIB residents
will be eligible to participate as voting members on the Providence Health System in
Alaska Community Board ( "PHSACB "). One member shall be appointed from the Hospital
medical staff and one member shall be a lay person from the community.
34.2 An Advisory Board will be appointed by KIB with the approval of Providence,
and function as liaison between KIB, the hospital staff, the medical staff, and Providence,
and shall be responsive to the concerns of the community regarding the operation of the
Hospital. Providence shall keep the Advisory Board updated with respect to matters of
Hospital policy and the relationship of the Hospital to the community and the surrounding
areas which it serves. Specifically the duties and responsibilities of the Advisory Board
include the following:
A. Review any changes in Hospital policy. Policies may be suggested
by Providence or the Advisory Board; but all require review by the Advisory Board of the
Hospital. 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
LEASE AGREEMENT- Page 19 of29
with its Medical Staff bylaws, and provide the recommendation of the Medical Staff to the
Providence for review and final action.
D. Review the operating and capital budgets prepared for the Hospital.
E. Review the rate and charge structures in the Hospital.
F. Review and comment concerning the quality of care rendered to the
patients of the Hospital.
G. Review any reports prepared by Providence.
H. Cooperate with Providence in meeting the requirements of any
Federal or State Law or statutes in retaining the Hospital license; in obtaining or retaining
accreditation from Joint Commission on Accreditation of Health Care Organizations and
in maintaining the requirement for participation under the Medicare /Medicaid, other
government programs and Blue Cross /Blue Shield.
To assist the Administrator in long range planning for the Hospital.
J. To assist Providence in reviewing administrator applicants and
recommend a candidate to Providence prior to the appointment of the Administrator by
Providence
K. To assist Providence in determining and deciding all matters of policy
relating to the public relations of the Hospital and the relationship of the Hospital to the
community and the surrounding area which it serves.
35.1 RIGHT TO ENTER PREMISES: Upon reasonable notice, Providence shall
permit KIB, its agents and employees to have access to and to enter the Premises at all
reasonable and necessary times to inspect the Premises.
LEASE AGREEMENT - Page 20 of 29
36.1 DEFAULT REMEDIES: "Event of Default" means any one or more of the
following events, whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any administrative or
governmental body:
A. Failure to pay rent required by Section 6.1 or 7.1 when such rent becomes
due and payable, and continuance of such failure to pay for a period of ten (10) days; or
B. Default in the performance, or breach of any other covenant or warranty
by Providence under this Agreement, with the exception of any obligations imposed under
Exhibit B, and continuance of such default or breach for a period of thirty (30) days after
there has been given, by registered or certified mail, to Providence by KIB a written notice
specifying such default or breach and requiring it to be remedied stating that such notice
is a notice of default hereunder; or
C. The entry of a decree or order by a court having jurisdiction in the premises
adjudging Providence as bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in respect of
Providence under the Federal Bankruptcy Act or any other applicable Federal or State law,
or appointing a receiver, liquidator, assignee, trustee (or other similar official) of
Providence or of any substantial part of its property, or ordering the winding up or
liquidation of its affairs; or
D. The institution by Providence of proceedings to be adjudicated as bankrupt
or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings
LEASE AGREEMENT - Page 21 of 29
against it, or the filing by it of a petition or answer or consent seeking reorganization or
relief under the Federal or State law, or the consent by it to the filing of any such assignee,
trustee (or other similar official) of Providence or of any substantial part of its property, or
the making by it of an assignment for the benefit of creditors; or the admission by it in
writing of its inability to pay its debts generally as they become due, or the taking of
corporate action by Providence in furtherance of any such action.
36.2 If an Event of Default by Providence occurs and is continuing, KIB may:
A. At its option, declare all installments of rent payable to be immediately due
and payable by Providence;
B. Re -enter and take possession of the Hospital without termination of this
Agreement, and use its best efforts to sublease the Hospital for the account of Providence,
holding Providence liable for the difference between the rent and other amounts payable
by the sublessee and the rents and other amounts payable by Providence hereunder;
C. Terminate this agreement, excluding Providence from possession of the
Hospital and use its best efforts to lease the Hospital, or to another for the account of
Providence, holding Providence liable for the difference between the rentals received and
the rentals which would have been receivable hereunder;
D. Terminate this Agreement, exclude Providence from possession of the
Hospital and either operate the Hospital or contract with a responsible operator to operate
the Hospital;
E. With respect to any personal property, exercise any remedies available to
a secured party under the Uniform Commercial Code; and/or
LEASE AGREEMENT - Page 22 of 29
F. Take whatever action at law or in equity may appear necessary or
appropriate to collect the rent then due and thereafter to become due, or to enforce
performance and observance of any obligation, agreement or covenant of Providence
under this Agreement.
37.1 TERMINATION: At any time either KIB or Providence may terminate this
Agreement by one year's written notice to the other party. This Agreement shall terminate
one year from the date of such notice without further action by either party and shall be of
no further force and effect other than to perform any obligation incurred but not paid prior
to the termination. However, if Providence is required to perform any duty or provide any
service under the terms of this agreement that is in conflict with the philosophy, mission
and values of Sisters of Providence, pursuant to Exhibit B, Providence may terminate this
agreement upon 90 days prior written notice to KIB. Upon such termination, Providence
shall surrender possession of the Hospital to KIB. On the effective date of such
termination KIB shall have the option to purchase any such accounts receivable, inventory,
supplies or equipment at a fair market value agreed to by both parties. Providence agrees
to co- operate in such a way as to allow KIB to show the Hospital to a prospective tenant
or accommodate the active transition needs of KIB for the actual termination. KIB agrees
to cooperate in such a way as to accommodate Providence transition needs and the
removal of Providence's assets.
38.1 TRANSFERS OF LICENSES AND PERMITS: The parties will cooperate and
jointly prepare and file all applications for transfer of licenses and permits incident to
LEASE AGREEMENT • Page 23 of 29
operation of the Hospital, including but not limited to transfer of permits for and inventories
of alcohol, narcotics and dangerous drugs.
39.1 NOTICES: All notices, demands, or other writings in this Agreement
provided to be given, made or sent, or which may be given, made or sent, by either party
hereto to the other, shall be deemed to have been given, made or sent when made in
writing and deposited in the United States Mail, Registered or Certified Mail, postage
prepaid, and addressed as follows:
KIB:
Mayor
Kodiak Island Borough
710 Upper Mill Bay Road
Kodiak, Alaska 99615
Providence: Chief Executive
Providence Health System in Alaska
3200 Providence Drive
P.O. Box 196604
Anchorage, Alaska 99519 -96604
39.2 The address to which any notice, demand or other writing may be given or
made or sent to any party as above provided may be changed by written notice given by
such party as above provided.
40.1 ASSIGNMENT AND SUBLEASE: Providence may assign this Agreement
and may sublease the Hospital, in whole or in part, only with the prior consent of the KIB,
but subject to each of the following conditions:
A. At the time of the making of any such assignment or sublease. there shall be
no Event of Default under this Agreement;
LEASE AGREEMENT - Page 24 of 29
B. Any assignee will continue to operate the Hospital as a hospital, in
accordance with this Agreement;
C. Any assignee of this Agreement shall expressly assume and agree to perform
and comply with all the covenants and provisions of this Agreement on the part of
Providence and shall be jointly and severally liable with Providence for any default in
respect to any such covenant or provision;
D. No assignment or sublease shall relieve Providence from prirpary liability for
all rents and other payments due and for the performance of all other obligations required
under this Agreement;
E. In the case of an assignment of the Agreement or a sublease of all or
substantially all of the Hospital, the assignee or sublessee shall agree to pay all rent
payable by it directly to KIB, less a pro -rata share of reasonable maintenance, repair, or
administrative handling costs;
F. KIB shall be provided promptly a duplicate original of the instrument or
instruments containing such assignment or sublease.
Providence may not mortgage or grant a security interest in this Agreement or
leasehold interest. Approval of all subleases assigned by Providence shall be concurrent
with the terms of this Agreement. Nothing herein will prevent Providence from leasing
space to physicians or other health care providers. No assignment for the benefit of
creditors or by operation of law shall be effective to transfer any rights to the Assignee.
41.1 DAMAGE OR DESTRUCTION: When all or any part of the Hospital is
destroyed or damaged, the KIB may:
LEASE AGREEMENT - Page 25 of 29
A. Proceed promptly to replace, repair, rebuild and restore the Hospital to
substantially the same condition as existed before the taking or event causing the damage
or destruction.
B. All buildings, improvements and equipment acquired in the repair, rebuilding,
replacement or restoration of the Hospital, together with any interests in land conveyed to
the KIB as necessary for such restoration, shall become a part of the Hospital and
available for use and occupancy by Providence without the payment of any rents other
than those provided in Section 6.1 and 7.1.
C. Rent shall be abated in the event of any destruction of, damage to, or taking
all or any part of the Hospital in proportion to the square footage which is unusable by
Providence.
D. If fifty percent (50 %) or more of the Premises are rendered untenantable by
the aforementioned causes, KIB shall have the right to be exercised by notice in writing,
from and after said occurrence, to elect not to reconstruct the Premises, and in such event
this Agreement and the tenancy hereby created shall cease as of the date of such
occurrence, the rent to be adjusted as of such date.
42.1 CONDEMNATION: If the Premises, or such part thereof as in the reasonable
opinion of Providence renders the remainder unusable for its purpose, shall be acquired
by eminent domain, then this Agreement shall cease and terminate as of the date that
possession is taken in such proceeding. Such termination, however, shall not be deemed
to deprive Providence of any of its rights to receive compensation by reason of such
taking.
LEASE AGREEMENT - Page 26 of 29
43.1 WAIVER OF SUBROGATION: KIB and Providence, both on their own behalf
and on behalf of all others claiming through or under either of them, hereby mutually waive
and release all claims, liabilities and causes of action against the other and the agents,
servants, employees and invitees of each other, for all loss, damage to or destruction of
the Premises or any portion thereof, as well as the fixtures, equipment, supplies and other
property of either party located in, upon or about the Premises resulting from fire or other
perils covered by standard fire and extended coverage insurance, whether caused by the
negligence of any of said persons or entities or otherwise, except to the extent such waiver
would violate or otherwise abrogate the terms of such insurance coverage.
44.1 MISCELLANEOUS: All covenants and agreements in this Agreement by KIB
or Providence shall bind their successors and assigns, whether so expressed or not. In
case any provision in this Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be affected or
impaired thereby. None of the terms, conditions, covenants or provisions of this
Agreement can be waived by either party except by appropriate written instrument. The
waiver by either party or any breach of any term, condition, covenant or provision herein
contained shall not be deemed a waiver of the same of any term. condition, covenant, or
provision herein contained or of any subsequent breath of the same or any other term,
condition, covenant or provision herein. This Agreement shall be construed in accordance
with the laws of the State of Alaska. Nothing in this Agreement, express or implied, shall
give to any person, other than the parties hereto, and their successors and assigns, any
benefit or other legal or equitable right, remedy or claim under this Agreement.
LEASE AGREEMENT - Page 27 of 29
IN WITNESS WHEREOF the parties have respectively executed this Agreement
the day and year written below.
SISTERS OF PROVIDENCE IN
WASHINGTON d /b /a PROVIDENCE
ALASKA MEDICAL CENTER
KODIAK ISLAND BOROUGH
By: By:
Jerome M. Selby, Mayor
Title
DATE: DATE:
STATE OF ALASKA
ss.:
THIRD JUDICIAL DISTRICT )
THIS IS TO CERTIFY that on the day of , 1996,
before me, a Notary Public in and for the State of Alaska, duly commissioned and sworn
as such, personally appeared Jerome M. Selby, to me known to be the Mayor of the
KODIAK ISLAND BOROUGH, and known to me to be the person who executed the above
and foregoing instrument on behalf of the municipality, and who acknowledged to me that
he executed the same as a free act and deed of the said entity for the uses and purposes
therein stated and pursuant to the authority granted to him by the Borough Assembly.
WITNESS my hand and notarial seal the day and year first above in this Certificate
written.
ATTEST:
LEASE AGREEMENT - Page 28 of 29
Notary Public in and for Alaska
My Commission Expires:
STATE OF ALASKA
) ss.:
THIRD JUDICIAL DISTRICT )
THIS IS TO CERTIFY that on the day of , 1996,
before me, a Notary Public in and for the State of Alaska, duly commissioned and sworn
as such, personally appeared to me known to
be the of SISTERS OF PROVIDENCE IN WASHINGTON d /b /a
PROVIDENCE ALASKA MEDICAL CENTER, and known to me to be the person who
executed the above and foregoing instrument on behalf of the corporation, and who
acknowledged to me that he executed the same as a free act and deed of the said entity
for the uses and purposes therein stated and pursuant to the authority granted to him by
the Board of Directors.
WITNESS my hand and notarial seal the day and year first above in this Certificate
written.
LEASE AGREEMENT • Page 29 of 29
Notary Public in and for Alaska
My Commission Expires:
EXHIBITS
Exhibit A. Title Report
Exhibit B Letter from Archbishop
Exhibit C Equipment List
EXHIBIT A
TITLE REPORT
To: KODIAK ISLAND BOROUGH
C/O JAMIN EBELL BOLGER & GENTRY PC
ATTN: JOEL BOLGER, ESQ.
323 CAROLYN ST.
KODIAK, AK 99815
DESCRIPTION:
WESTERN ALASKA LAND TITLE CO.
503 Marine Way, Suite 3 -B P.O. Box 864 Kodiak; Alaska 99615
(907) 486 -4433 Fax (907) 486 -5109
LIMITED LIABILITY REPORT
Date: February 18. 1997 ft 8:00 a.m.
Amount due $250.00 Tax exempt
That title to the property described herein is vested on the date shown above in KODIAK ISLAND BOROUGH, an
estate in fee simple, subject only to the exceptions shown herein.
This report shell have no force or effect except as a basis for the coverage specified herein.
- continued -
B
No. WA -10513
e
HuA Validating
Signatory
Timothy J. Y 9 s ry
LOT TWO "A" (2A), HOSPITAL SUBDIVISION, ACCORDING TO PLAT 96 -3, LOCATED IN THE KODIAK
RECORDING DISTRICT, THIRD JUDICIAL DISTRICT, STATE OF ALASKA.
NOTE: Invesdption should be made to deternune if there are any service, installation, neiatauece, or constntcdon charges for sewer, water or electricity.
'NESTERN ALASKA LAND TITLE COMPANY
ORDER NUMBER WA -10513
PAGE TWO
SUBJECT TO:
1. Reservations contained in United States Patent.
2. Reservations as set forth in State Patent recorded March 24, 1967 in Book 19D at Page 204.
3. Matters disclosed by Plat 95 -3.
4. Right -of -way and Easement granted to Kodiak Electric Association, Inc. and its successors and assigns
including the authority to construct, reconstruct, maintain, repair, improve and update an electric transmission
and /or distribution line or system, including but not limited to poles, towers, wires, guys and such other
structures as Kodiak Electric Association, Inc. may deem necessary, also including the right to remove such
things as trees, shrubs, fences or anything else which Kodiak Electric Association, Inc. feels would be a
menace or danger to the operation of said system, recorded October 23, 1995 in Book 139 at Page 556.
(Affects those portions described therein.)
5. This report is restricted to the use of the addressee, and is not to be used as a basis for closing any
transaction affecting title to said premises. Liability of the company for the information provided herein and
any claim of negligence resulting therefrom shall be limited to the compensation received therefor.
TJH /an
02/26/97
wa- 10513.newfolio
EXHIBIT B
LETTER FROM ARCHBISHOP
Office of tta Arttlbehop
Mr. Duuwee Bruce
Administrator
Providence Alaska Medical Center
3200 Providence Drive
P.O. Box 196604
Anchorage. AK 99519 -6604
Dear Mr. Bruce,
apcnosocese ancnoQace
m Cotten smart • anowwre. atom Ortow0s
9ofn5s769e • fa% 907n794e11e
September 9, 1996
The ;nitiative of Providence Alaska Medical Center to enter into an
operating agreement with small Alaskan rural communities for tht purpose
of providing better health care for more people is one that I applaud. It
without question is fully consistent with the cemritment of the Catholic
Church and Ire Sisters of Providence to meet the human as well as the
spiritual needs of people.
From my own observation of with the health care available In the smatter
communities of Southcentral Alaska, I know how much the people strongly
desire that more medical services be more readily avallabie to them
locally. Local communities can not meet the escalating costs of medical
equipment and care. The people are often prevented rrom traveling to
medical centers in Anchorage because of distance and weather. In
addition to that, it is the desire of patients to be dose to their families,
friends and ministers at the time of illness.
The operating agreement being developed by the City of Kodiak and by
Providence Alaska Medical Center will alleviate these difficulties. The plan
is. if you will allow a play on words, providential.
Forging operating agreements presents some difficulties In communities
whore there are many varied and at times conflicting attitudes and
convictions about what medical practices are morally permissible. The
guidelines utilized for Catholic health care systems are Contained In the
thical and Reli foes Directives for Health Services Of the Catholic Bishops
3 then_ United ' es. , Ciiy of Kodiak has itandards for Kodiak
Hospital.
Mow have Indicated that the City 0 Kodiak deems it necessary that their
long standing practice of elective sterilization be continued. As you
knew this practcts is not within the Oirectivet.
road ask if it would be within the parameters of the Catholic teething for
Providence Medical Center to tolerate the continuance of that practice
within the City of Kodiak as part of the sgreemsnt.
September 9, 1996
Page i
I take note 0 an important factor. Kodiak Hospitat remains a community
hospital. The operating lease does not change that. The mutually
accepted terns of the lease Identify the principles and practices that will
allow both Providence and the City of Kodiak to be faithful to their
commitments.
.n this context 1 make an observation about moral decisions.
Moral decisions are generally not made by the application of only one
principle. Rather, several principles must be recognized and brought into
harmony. In this instance the Prinlcipla of cooperation may be brought
into play with our principles relative to life and respect for the human
body. Within the principle of cooperation 'and under certain conditiOns
and circumstances it is permissible that one may cooperate materially, in
an action of another that is contrary to one's convictions.
in my j3dyment the principle of material cooperation does apply in the
situation that prevails in Kodiak. Kodiak Hospital remains a community
hospital. The operating agreement with Providence Alaska Medical Center
does not transform it into a Catholic Hospital. Rather Kodiak Hospital
remains a rranmunity hoenital of the City of Kodiak. The mutually •
accepbrd terms of agreement define the practices that will be permitted.
The material cooperation fnr eteriliration in no way implies approval of the
procedure by Providence.
I hope that the arrangement with the City of Kodiak comes to completion.
I know the community well. 1 was personalty involved in working out an
agreement with the administrators of the City for the establishment of
erviher Francis Shelter - Kodiak.
Cod bless.
Sincerely In Christ.
4C P74/4 " ..4: W ea l
*Franc's T. Hurley
Archbishop of Anchorage
TOTAL P.03
EXHIBIT C
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