In response to what Vashon Health Care District (VHCD) commissioners are now starkly characterizing as an impasse with Sea Mar Community Health Center, VHCD now says it has asked Sea Mar to consider a process of mediation to work through issues in the ruptured relationship.

In an interview on Sept. 16, VHCD superintendent Eric Jensen and commissioner Alan Aman detailed the recent request to Sea Mar that a mediator be engaged to help resolve the dispute — which, if not addressed on a tight timeline, could interrupt islanders’ access to primary health care at Vashon’s Sunrise Ridge Clinic.

At play is Sea Mar’s request to operate independently of VHCD at Sunrise Ridge Clinic, as well as its announcement that it also intends to build its own healthcare clinic on Vashon.

According to Jensen, the district has now proposed to extend Sea Mar’s termination date at the clinic, from Dec. 31 to June 30, in order to allow both parties more time to work through a long-term agreement, but has not yet received a response.

But beyond this immediate deadline, both Jensen and Aman said that VHCD is seeking a broader understanding — as elected officials charged with overseeing Vashon’s healthcare landscape — regarding Sea Mar’s expansive plans to operate on Vashon without the cushion of VHCD’s generous tax subsidy. (See commentary, page 6.)

Since late 2020, VHCD’s tax subsidy has contributed a total of $2.75 million in revenue to Sea Mar, allowing the clinic to operate with a budget surplus.

Both commissioners and the community, Aman said, need to better understand how Sea Mar’s operations on Vashon can remain sustainable, in the long term, without that revenue.

“While islanders are attracted to the ‘free lunch,’ idea, we want to propose questions or conditions and index it to reality,” he said. “How can they put forth a zero-cost option?”

Jensen, who first approached Sea Mar in 2020 to operate the clinic, said that Sea Mar’s prior stance had always been that it required a subsidy to operate on Vashon.

“They immediately said they needed the $1.5 million subsidy,” he said. “That has been their position all along.”

And indeed, monthly financial statements submitted by Sea Mar to VHCD and shared with The Beachcomber, show that without VHCD’s tax subsidy, the organization’s losses at the Sunrise Ridge Clinic would have been steep.

According to the statements, from the time Sea Mar began operating the clinic in November 2020 through July 2022 – the last month for which information is available – the clinic’s expenses totaled about $4.4 million, with net revenues for that period totaling about $5.1 million.

But subsidy payments from VHCD accounted for about $2.5 million of that revenue — without which, the clinic’s revenues would have fallen about $1.8 million short of expenses.

And while Jensen acknowledged Sea Mar’s recent offer to reduce the subsidy by $400,000 a year, he pointed out that they had not, until now, suggested it could be eliminated altogether.

He also attributed that offer to a one-line item in Sea Mar’s year-end financial statements, reflecting six months of substantially increased revenue resulting from a new contract with Vashon Pharmacy.

“This is the primary reason Sea Mar offered to reduce the subsidy retro to April 1,” Jensen said.

Both Jensen and Aman said that they could now only speculate on Sea Mar’s plan for financial solvency at an independently-operated clinic — suggesting that perhaps, Sea Mar’s larger operations throughout Washington could possibly subsidize its losses at a Vashon clinic.

Sea Mar Community Health Centers, a nonprofit federally qualified health center (FQHC) that operates more than 50 medical and dental clinics as well as other facilities including affordable housing, recorded net profits of almost $16.5 million in 2020.

Still, Aman said, Vashon’s patient demographic served at the Sunrise Ridge clinic does not match the populations generally served at Sea Mar’s other clinics — which ensure sustainability through federal grants and cost-based reimbursements for Medicaid patients.

Aman questioned whether Sea Mar would want to subsidize its operations in a wealthier community, such as Vashon, with revenues brought in from the low-income populations served by its mission.

Thus far, Sea Mar executives have offered general reassurances that their organization would not only be able to operate without a tax subsidy on Vashon, but also, eventually, become profitable.

Mike Leong, the senior vice president of corporate and legal affairs for Sea Mar, told The Beachcomber in a Sept. 2 interview that if Sea Mar were to establish a clinic on Vashon, “we would operate at a loss for a short time frame, but as with all our other clinics, we would be financially sustainable.”

And on Sept. 9, Mary Bartolo, the nonprofit’s executive vice president, said much the same in regards to Sea Mar’s current proposal to continue operations at Sunrise Ridge independently of VHCD.

“…We are prepared to absorb any operating losses until the clinic becomes financially self-sustainable which we are confident it will do as we stabilize operations,” she said.

Bartolo, reached by phone at The Beachcomber’s press deadline on Tuesday, said that she would soon respond to The Beachcomber’s two recent requests, by email, for more detailed information detailing Sea Mar’s financial plan for its continued presence on Vashon.

Bartolo also said she would respond to another email from The Beachcomber, sent on Sept. 15, requesting more specific information on the property that Sea Mar intends to buy on Vashon, including its cost and location.

Conflict timeline

VHCD’s request for mediation and broader communication from Sea Mar comes after a series of conflicting announcements, which began with a termination letter sent to VHCD on Aug. 24. The letter — which VHCD commissioners and Jensen said came as a surprise to them — gave a Dec. 31 termination date for both Sea Mar’s services agreement with VHCD and its sublease at the Sunrise Ridge clinic.

Two days later, a press release headlined “Sea Mar Community Health Centers to leave Vashon Island” explained that VHCD’s desired level of involvement in clinic operations conflicted with Sea Mar’s need to operate independently.

But only days later, Sea Mar executives abruptly reversed course, informing both The Beachcomber and VHCD that they wanted to continue to operate at the Sunrise Ridge clinic while building its own new clinic on Vashon.

All this, they said, Sea Mar could do without a tax subsidy from Vashon Health Care District (VHCD).

On Sept. 9, Bartolo told The Beachcomber that Sea Mar had located land that it intended to purchase for the purpose of building its own 11,500 square-foot building — a footprint she said would mean that Sea Mar would also not be able to build affordable housing in proximity to the clinic, as the organization has done in other communities.

All these developments coincide with VHCD’s separate purchase of 2.3 acres of land, for a below-market price of $570,000, at 18109 Vashon Hwy. SW, on the west side of the highway south of Kathy’s Corner garden center, on which it intends to build its own clinic.

State funding at stake in dispute

At play, in the issue of which entity will build what, and when, is $3 million in state funding allocated to build a new clinic originally awarded to the clinic’s former provider, Neighborcare Health, in 2018. In 2021, that $3 million appropriation was transferred to Sea Mar, when it took over the operation of the clinic after Neighborcare left in 2020.

In July, VHCD told The Beachcomber that it hoped to tap that funding for its new health care clinic.

But in late August, following Sea Mar’s letter of termination to VHCD, Mike Leong, executive vice president of Sea Mar, left the door open as to whether the money would be transferred back to VHCD.

“If Sea Mar is not building a clinic on Vashon, Sea Mar will transfer these funds back to whoever is building a clinic,” he said.

Sea Mar executives told The Beachcomber the following week that they indeed intended to build a health care clinic on Vashon, and on Sept. 9, Bartolo said that Sea Mar had located property on Vashon that it intended to buy.

The $3 million in state funding came in response to a request to Sen. Sharon Nelson, a Vashon resident, by members of Vashon-Maury Health Collaborative, a nonprofit helmed by health care advocates on Vashon.

The group was also instrumental in the successful campaign to establish VHCD, and earlier worked behind the scenes to secure the land which VHCD has now recently purchased for the purpose of building its new health care center.