When the Girdwood Clinic’s lease expires at the end of August, it faces two possible futures: the building lease will be reassigned to the newly formed non-profit Girdwood Health Clinic, Inc. (GHCI) or it will go out of business. But the lease reassignment hinges on several sticking points with the landlord – the non-profit Turnagain Arm Health Center (TAHC).
The 7-member board of TAHC made up of Girdwood residents held its quarterly meeting March 28. The main focus of the meeting was GHCI’s request for a lease assignment.
The clinic had operated as a for-profit private clinic by owner Kerry Dorius, an advanced nurse practitioner, since 2000, but on Dec. 22, 2011 declared itself a non-profit clinic under GHCI.
The TAHC meeting followed a community meeting held by GHCI March 14 at the Girdwood Community Center where six of the eight board members that make up GHCI answered questions along with TAHC board president Michael Kessler and TAHC board member Tracy Knutson.
The majority of residents in attendance were vocal supporters of the clinic, and many who spoke out expressed their concern over the possibility of it closing.
At TAHC’s meeting, the need for a viable business plan from GHCI was the primary concern expressed by board members. GHCI had submitted a 5-page business plan, but the TAHC board did not accept it and is seeking a more in-depth plan. The main concern of the TAHC board is that the clinic will not be able to meet its financial obligations, most importantly the $2,300 per month it costs to rent the 30-year-old renovated former Post Office building.
TAHC has recommended that GHCI work with the Foraker Group in Anchorage, an organization that assists and offers consultation to non-profits, to develop their business plan.
At the TAHC meeting, Knutson said the Denali Commission was willing to give a small amount of money to GHCI to pay to develop a legitimate business plan with the Foraker Group.
“The Denali Commission has been very forthright with GHCI about saying this 5-page business plan that has no financial history, no solid numbers about where anything is coming from, is not even remotely close to what a business plan would look like,” Knutson said. “A business plan should be 50 pages with multiple addendums, multiple exhibits, multiple pieces showing you’ve got your insurance in place, you’ve got this, you’ve got that, you’ve got the whole thing figured out.”
She said they approached the Denali Commission again after the GHCI community meeting with additional concerns.
“One of the additional concerns that we have, of course, is that this new group (GHCI) bypassed the lease requirement that they obtain our approval first,” Knutson said. “So we’ve got somebody (GHCI) running a medical clinic with no initial experience. They’re community members, great. Wonderful community members, but who have never run a medical business.”
Knutson stated she had one pressing concern with the new non-profit GHCI that six to eight months ago GHCI was “enticed to sign a note of indebtedness” to Dorius.
“So, we have this group of community members who are essentially in debt with no business plan, no rational reason to believe they are going to receive state or federal funding, and that should be of concern to all of us,” she said. “That was expressed to the Denali Commission, and they came back to us and said, yet again, ‘you stay the course, let us pick up some of this heat. We’ll work with this group…’”
Knutson further stated that the Denali Commission met with four members of GHCI, and two were supportive of working with the Foraker Group to develop the business plan, and two were not.
However, it now appears the GHCI board is moving ahead with plans to work with the Foraker Group. GHCI board member Gene Bjornstad and Dorius met with this reporter at Dorius’ house to discuss the clinic’s plans. They stated that they are going to work to develop a business plan that they hope will satisfy the TAHC board. They also provided proof of liability insurance, which had been a concern of TAHC.
“We will work with the Foraker Group and demonstrate to TAHC that the Girdwood Clinic is viable, and can be in the future,” said Bjornstad. He added, however, that the TAHC board has asked for a 5-year plan, something he feels is unreasonable. “No business can forecast five years into the future. That’s what they’re asking to see.”
Dorius and Bjornstad also addressed the note of indebtedness and confirmed that the GHCI board signed a promissory note to pay $135,000 to Dorius over a 5-year period for the clinic.
“We bought a business,” said Bjornstad. “We had no funds until we had a non-profit in December of 2011.” He said the price offered for the business was based on two appraisals conducted in 2005 and 2011, which valued the clinic at around $140,000.
As for the clinic’s financial viability, they said it has been bringing in a net profit of $48,000 per year, and it generates an annual revenue of about $400,000, half of which goes towards salaries.
“We have a stable base of patients,” said Dorius. “Right now we have 1,800 to 2,200 patient visits per year.”
But Dorius said the goal of a non-profit clinic is to go beyond the services she offered as a private clinic.
“We need to be a sustainable non-profit clinic, and we have to have on-call services, care nights and weekends. We have to have a telemedicine technology.”
She stressed that the clinic would be eligible for federal funding as a stand alone community health center given that it not only serves Girdwood, but all Turnagain Arm communities: Bird, Indian, Portage, Hope and Sunrise. Hope and Sunrise, she said, are the key for the clinic to receive designation as a community healthcare facility for underserved communities.
Establishing a community non-profit healthcare center was also the original goal of TAHC. In 2005, the organization received a $450,782 federal grant from the Denali Commission to buy the old Girdwood Post Office building and renovate it for a non-profit clinic. But the board gave up on the plan to start a non-profit clinic and dissolved shortly afterwards.
In 2008, a new TAHC board formed headed by then president Tracy Knutson, and the original TAHC mission to “facilitate the establishment and operation of a community health center in Girdwood and to serve communities of Turnagain Arm” changed to “contribute to continued and expanded healthcare and health awareness.”
TAHC seeks to donate money toward healthcare needs in the community. For example, they recently donated over $800 for flu shots. The board looks to use profits from the rent of the building to contribute to the healthcare needs of Girdwood.
It was continually expressed by both Kessler and Knutson at the TAHC meeting that the board has a fiduciary responsibility to maintain the building and keep it profitable, and, in turn, use any profitability towards achieving its current mission.
The board also stated their support for the mission of GHCI to operate a non-profit clinic.
“We reiterated our support at the community meeting for GHCI’s goals,” said Kessler, “and that we simply, from a business standpoint, wanted to see them meet this criteria so that we can make the assignment of the lease. We want to sign a lease with them, but they need to supply us with the proper documentation. That’s part of our fiduciary responsibility here, to make sure they’re meeting the same obligation that any other business entity going into a lease situation with any other landlord reasonably should meet with the municipality of Anchorage or the state of Alaska. And they have failed to do that.”
If the clinic fails to meet the criteria then the TAHC board is ready to head in a new direction and lease the building to another tenant, perhaps getting more rent for it.
“We are a healthy non-profit entity because we receive rent from that building,” said Kessler. “It has nothing to do with the Girdwood Clinic, it has nothing to do with healthcare, it has nothing to do with anything other than that building can produce rent. That’s why this entity is profitable.”
“The original TAHC board that set out to do a non-profit (clinic), knocked itself out trying, and failed,” added Knutson. She said the board subsequently fell apart and got down to the point where there were only two board members, at which time she formed a new board. She said they got audited and had the building reappraised.
“A couple of years ago we rewrote the TAHC mission statement and said we’re probably not going to run a big medical clinic, which is what the original intent was, “ she said, “but we want to make sure that TAHC supports healthcare in Girdwood, so we want to serve a healthcare tenant. We’ve taken what little monies we’ve had, we’ve done all kind of grants in the community, and our mission is to make sure that community asset (the building) stays viable because it came from federal money.”
The TAHC board of directors next meeting is scheduled for May 9 at 6:30 p.m. at a yet to be named location.
As for the GHCI board, they received good news this past week, announcing the receipt of a donation of $25,000 from Orthopedic Physicians Anchorage, who stated, “These funds are provided in recognition of the recent change to non-profit status and in support of your mission and vision to provide affordable health care services to the community of Girdwood and surrounding areas. We further encourage other residents and employers who rely on the medical service provided by the Girdwood Health Clinic to contribute as well.”
GHCI’s board said the donation contributed to 25 percent of its fundraising goal for this year, but acknowledged much more is needed.
The GHCI board also put in a request for a state grant for $524,000 now before the legislature for consideration.
“We’ll be competing with everybody else in the state for that,” said Bjornstad.