Has Kootenai Health outgrown the hospital district model?

COEUR d’ALENE — Kootenai Health management is ready to decide whether the hospital district should transition from state ownership to a nonprofit.

Idaho county hospitals have long had the option of transitioning from public ownership to private nonprofit organizations. An update to the law that took effect July 1 gives hospital districts like Kootenai Health the same options that were already available to county hospitals.

The amendment to the existing law was passed almost unanimously by Idaho lawmakers, including those in North Idaho.

“We have a responsibility to at least weigh the pros and cons,” said John Ness, CEO of Kootenai Health.

That evaluation was done several months ago, and this week Kootenai Health released a white paper outlining the pros, cons and considerations for transitioning to a 501(c)3. The white paper is available at KH.org/501c3.

The assessment shows that the not-for-profit model provides certain advantages, such as continuity of governance without the constraints of a two-year election cycle. The model would also improve access to capital and diversified investment opportunities prohibited by the hospital district structure.

By converting to a nonprofit, Kootenai Health, which has been a hospital district since 1956, will relinquish its taxing powers, sovereign immunity and eminent domain authority.

Kootenai Hospital District trustees will ultimately decide whether those pros and cons are worth the transition.

Steve Mathison, who is the Kootenay County treasurer and Kootenay Hospital District trustee, said he thinks more time and public input is needed before a decision is made.

In fact, Matheson said he thinks the issue should be put to a public vote.

“The community had the confidence to make a decision in ’56,” he said. “Let’s restore trust and let the community decide again.”

However, the statute provides for a public vote only in the event that a hospital district is to be sold to a private entity. The decision to convert to a nonprofit organization can only be made by the hospital district trustees, who are elected by county residents.

Additionally, if a hospital transferred to a not-for-profit corporation ceases to be used as a not-for-profit hospital, it reverts to the ownership of the hospital district. That means it would be impossible for Kootenai Health to be purchased by a private entity if it became a nonprofit.

Matheson indicated that he sees both advantages and disadvantages to the nonprofit model. But he does not feel he has had enough time to consider the facts and form an opinion.

“I think the bottom line to go to a 501(c)3 is probably the right one,” he said. “I’m just not ready to go there yet.”

Having had time to learn about the nonprofit model, Matheson said he thinks the community is likely to support the change.

At noon Tuesday, the board of trustees will meet in a special meeting to review the white paper evaluating the 501(c)3.

The Joint Chamber Public Policy Committee, representing the Coeur d’Alene, Post Falls, Hayden and Rathdrum Chambers of Commerce, will also review the white paper evaluating the 501(c)3 during a moderated information session.

The session will be held on Thursday, December 8, from 5:30 to 7:00 pm at the Best Western Plus Coeur d’Alene Inn, 506 W. Appleway Ave., Coeur d’Alene. The event is free and open to the public.

Trustees will meet again Dec. 13 to decide whether to turn the hospital district over to a nonprofit.

Matheson said he would accept the result, whatever it was.

“I have great confidence in John Ness and his team,” he said. “I believe in the process. I’ll go along with whatever the board decides.

Kootenai Health’s situation is unique both in the state and the region. Among Idaho’s eight hospital districts, it is the only one that does not exercise its taxing authority.

Idaho’s other hospital districts are mostly rural, critical care facilities that are much smaller than Kootenai Health. No one can make the switch to nonprofits.

In the Pacific Northwest, only two large hospitals with more than 300 beds are hospital districts: Kootenai Health and Evergreen Health in Kirkland, Washington.

“Kootenai Health is a different organization today than it was in the past,” Ness said.

This is due in large part to growth in North Idaho. Kootenai Health has outgrown the district hospital model, Ness said.

Kootenai Health is not just a local hospital. It is the regional referral center for all of North Idaho, with about one-third of hospitalized patients coming from outside the county.

If the Kootenai Hospital District exercised its taxing authority — which it hasn’t since 1995 — Kootenai County taxpayers would foot the bill for a hospital that serves patients coming from 10 counties.

Additionally, under the district hospital model, all trustees of Kootenai Health must be residents of Kootenai County. Ness said the nonprofit model will make it possible to recruit qualified trustees from a wider geography, more aligned with the population the hospital serves.

Kootenai Health also operates in a competitive market, Ness said.

As a hospital district, Kootenai Health is subject to open meeting and public disclosure requirements. That means any competitor, in Idaho or elsewhere, can listen in as the board discusses its plans for the future.

“We’re at a competitive disadvantage,” Matheson said.

Becoming a non-profit organization would eliminate this disadvantage.

The initial board of trustees will be the same group currently operating.


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