Unalaska's Clinic Will Receive $500K Loan From City, As Financial Troubles Continue

Mar 20, 2019

The City Council has directed the city manager to draw up a long-term loan agreement that won’t have to be repaid until the clinic whittles down its deficit. Terms will be discussed further on March 26.
Credit Laura Kraegel/KUCB

Unalaska's clinic has made another emergency request for city funds — less than a year after the nonprofit community health center was reportedly back in the black.

Presented to the City Council last week, the $500,000 request is the same amount Iliuliuk Family and Health Services received as a city grant in 2017 — before former director James Kaech said it wasn't needed after all.

That reversal was misguided, according to Bil Homka, the vice president of the clinic's board of directors.

"I think it was with some hubris and/or pride that our last CEO was thinking we were doing better than we were," Homka told the council. "We were changing billing systems, we were changing a lot of things, and it looked like we were in the black, if you recall. That's not the case."

Homka said the clinic is still in the red — thanks, in part, to an expensive snag with the new billing and records systems. They were supposed to be up and running quickly, but confusion over who was allowed the manage the accounts delayed the process by 180 days and halted cash flow from insurance reimbursements.

That wait forced the clinic to use the savings it had scraped together and undid a lot of its financial progress — a problem that Kaech acknowledged Wednesday in a phone interview from Corvallis, Washington, where he moved after resigning last month.

"We didn't know what we didn't know," said Kaech. "We didn't know that I wasn't an approved signer, and the integration took a little more time and was a little more painful than expected. That was my fault. I'll take 100 percent blame."

Even though reimbursement rates are now improving, the clinic's board said its financial struggles are ongoing and multifaceted. The biggest contributor is the high cost of providing after-hours urgent care as a small health center.

"If you look at our books over the last 10 years, the cost of our after-hours service is pretty much what we're in the hole for every year," said treasurer Sharon Svarny-Livingston. "Because we can't code and bill as an emergency hospital service — which we would get much more money for, which would cover the cost of staff and supplies — we will just never be able to make that up."

Still, Svarny-Livingston said the clinic is working on a number of ways to reduce its deficit, which has averaged about $480,000 per year over the last decade.

Clinic staff is contracting with the new billing company to recover payments lost to coding missteps. They're digging into the insurance policies of major local employers to understand why some patients can't or won't pay their bills. And they're continuing to build a partnership with the Aleutian Pribilof Islands Association, the regional nonprofit that provides primary care and behavioral health services to tribal members.

On top of all that, new interim director Will Rodgers said he'll be looking closely at the clinic staff.

"Bringing in these part-time doctors, the locums — that's very expensive," said Rodgers. "That's something that I think has to be addressed. How do we staff the organization to be sustainable?"

After some back and forth, the City Council agreed to help the clinic while it implements changes and tries to become more self-sustaining. Councilors directed the city manager to draw up a long-term loan agreement — one the clinic won't have to repay until it whittles down its deficit.

Vice Mayor Dennis Robinson said he's optimistic the clinic can do that.

"I think there's a light at the end of the tunnel," said Robinson. "With the cuts you're making and the tightening up on revenues that have been slipping, it sounds like it may go."

Councilors will continue discussing the loan's terms at their meeting on March 26.