MEMORANDUM

TO: Pete Sprague, Assembly President

Members, Kenai Peninsula Borough Assembly

THRU: Dale Bagley, Borough Mayor

FROM: Colette Thompson, Borough Attorney

Jeff Sinz, Finance Director

DATE: November 27, 2002

SUBJECT: Resolution 2002-149, Supporting the development of a dental clinic

This resolution states the assembly's support for the development of a dental clinic service Medicaid eligible patients within the central Kenai Peninsula Hospital Service Area and authorizes the administration to negotiate an agreement with the State of Alaska. This would enable Central Peninsula Health Centers, Inc. (CPHC), a nonprofit entity, to purchase and begin operating a dental clinic that accepts underinsured, uninsured and Medicaid patients within the Central Kenai Peninsula Hospital Service Area (CKPHSA). This program was briefly described to the Assembly during the committee meeting on September 17, 2002. CPHC has been working for some time towards starting such a dental clinic in the Kenai/Soldotna area. At this time, only one other dentist is known to be providing services for such patients within the local area and studies show there is an enormous need for such services.

The proposal under consideration would require that the Kenai Peninsula Borough, through the CKPHSA, contribute $794,785 by way of an Intergovernmental Transfer (IGT) to the Division of Medical Assistance with the State of Alaska. The funds would be appropriated from the CKPHSA during the FY2004 annual budget process, using funds transferred from the CPGH Hospital Plant Expansion and Replacement Fund. The State of Alaska would add $1,099,702 to that amount and pay to CPGH, Inc. the combined sum of $1,894,487. CPGH, Inc. would pay $324,702 back to the Division of Medical Assistance for additional statewide Medicaid programs and pay $725,000 to CPHC, Inc. for the dental clinic. Also, CPGH, Inc. and the borough would retain a total of $50,000 for an administrative fee, The balance of $794,785, which is the amount originally contributed through the IGT, would be retained by the hospital for hospital purposes. The state would seek reimbursement from the federal Medicaid program of $1,099,702, the amount it contributed to the project. In the final analysis, from the federal funds the state stands to gain $324,702, CPHC would receive $725,000 for the dental clinic, and the borough and hospital would retain $50,000. The community would receive the services of a dental clinic that accepts Medicaid-eligible, uninsured and underinsured patients.

This resolution would authorize the administration to negotiate agreements with the State of Alaska, CPHC, Inc. and CPGH, Inc. as appropriate. CPHC, Inc. offered to give the Kenai Peninsula Borough a security interest in the dental facility it purchases in order to manage the borough's financial risks associated with this project. Accordingly, the administration recommends that any final agreement be collateralized by the purchased facility and other property with value sufficient to cover the borough's financial exposure. This resolution includes that as a requirement.

Central Peninsula General Hospital is eligible to receive these funds because it provides services to a significant number of uninsured, underinsured and Medicaid- eligible patients. Accordingly, the administration recommends, and the state tentatively agreed, that any agreement entered at this time would include or be accompanied by a statement of intent that the state and borough work cooperatively so that future DSH funds may more directly benefit CPGH.

It should also be noted that another program called PROSHARE is being pursued by the state Department of Medical Assistance for the dental clinic. This program is similar to the DSH program but the state is trying to obtain local funding from other state agencies rather than the Kenai Peninsula Borough hospital. A benefit of proceeding with the PROSHARE program is that the funding could be made available in FY'03 rather than FY'04. If the state secures funding through the PROSHARE program, the CPHC funding could be provided in FY '03, and the borough and state could renegotiate the distribution of the Medicaid DSH funds. In any event, the assembly will be notified accordingly.