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Health service district strikes new agreement with Mercy

At its regular monthly meeting Tuesday night, the Upper San Juan Health Service District Board of Directors approved an “amended and restated” Pagosa Mountain Hospital management contract with Mercy Regional Medical Center in Durango. The document, effective immediately, replaces a previous agreement adopted in July 2008.

According to PMH Chief Executive Officer Brad Cochennet, a revised contract became necessary as certain hiring and staff evaluation practices changed. In the original agreement, Mercy provided a financial advisor to assist in the handling of PMH finances. As a Mercy employee, the advisor also shared in routine hospital CEO evaluations.

But when Mercy’s financial advisor resigned last summer, Gene Kaberline, of BE Smith Inc. of Lenexa, Kan., became the district’s interim Chief Financial Officer. In October, when the district confirmed Kaberline as a permanent employee and official CFO, language in the management contract needed revision.

Too, with the CFO now an employee of the district and not Mercy, any occupant of that office could no longer participate in CEO evaluations. Therefore, contract language again needed change.

As stated in the new contract, “In accordance with the terms of this Agreement, Mercy will provide management assistance for Hospital as requested by the (district) Board or the CEO.”

The contract affirms PMH’s full-time CEO as a district employee who reports directly to the district board of directors, and spells out various management responsibilities associated with that position. It also allows assistance from Mercy — if requested by the district board — in the event that finding and retaining a new CEO becomes necessary.

To assert district control over management of its CEO, paragraph 1(b)(v) of the revised agreement states, “Nothing herein contained shall be interpreted to modify the Board’s statutory power and exclusive authority to manage, control and supervise all the business and affairs of the Hospital through its retention, employment or termination of the CEO.”

The new contract invokes additional services Mercy might provide the district, such as help in identifying opportunities to enter into managed care contracts with other healthcare providers; or extending consultative, administrative or educational support. While allowing Mercy to provide the district assistance in these areas, the agreement does not obligate it to do so.

In part, paragraph 1(c) of the agreement reads, “ … The parties agree that Mercy shall not have authority to bind the District or Hospital with respect to any particular contract, but rather that Mercy shall only present to Hospital certain contracting opportunities, which Hospital may accept or decline.”

Again in part, paragraph 1(d) reads, “ … Mercy, in its sole and absolute discretion, shall also have the right to decline an invitation or request by the Hospital CEO to provide any such Additional or Extra Services.”

And, in the event that Mercy chooses not to assist in certain areas, most likely due to inadequate staff, PMH may, in its sole and absolute discretion, contract with an outside party for such services.

The agreement also outlines compensation to Mercy for services rendered and contains guidelines for maintaining a good working relationship between parties. Above all, perhaps, it illustrates the district’s complete independence from Mercy and reflects the administrative progress PMH has made since its opening in January 2008.

As district director Jim Knoll put it Tuesday evening, “We just made realistic changes in the contract and still have a good relationship with Mercy.”

In a Wednesday phone interview, Cochennet added, “Early on, we needed more help from Mercy, but we need less today. We’re not part of Mercy, but we have a good arms-length agreement.”