No clear blueprint for DCHS’s future

IRON MOUNTAIN — Dickinson County Healthcare System is among scores of hospitals nationwide considered at risk, and there is no blueprint for avoiding closure.

Across the U.S., about 18 percent of hospitals are weak or at risk of closure, according to a Morgan Stanley analysis published last month. Among the 6,000 private and public facilities examined, the study found 450 could potentially close, while another 600 were in weak shape, based on financial and occupancy data.

DCHS officials have twice explored a sale to a larger health care provider, only to be rebuffed. The most recent blow came when it was announced Tuesday that a sale to Marquette-based UP Health System will no longer be pursued. The organizations said they had terminated a non-binding letter of intent signed in July, citing “an inability to reach agreement on the terms of an acquisition.”

DCHS began talks with U.P. Health after a proposed deal with Bellin Health of Green Bay, Wis., fell through in May. Bellin withdrew from an acquisition agreement that was estimated at $61 million, all of which would have gone to pay the hospital’s long-term debt and unfunded pension liabilities.

The American Hospital Association says hospitals in the U.S. have been closing at a rate of about 30 a year. The new Morgan Stanley study predicts an increase over the next year to 18 months.

A joint meeting of the Dickinson County Board of Commissioners and the DCHS Board of Trustees likely will be scheduled early next week, County Controller Brian Bousley said.

Commissioners are seeking assurances there will be no abrupt shutdown. Hospital officials, meanwhile, have emphasized community support and utilization as the key to keeping DCHS viable. Competition from Bellin Health for diagnostic services is among many immediate concerns in the ebb and flow of the hospital’s finances.

The DCHS Board has yet to meet since it was announced Tuesday there would be no sale to U.P. Health. A report from hospital attorney Michael Celello also is pending.

“The management team and board will continue to work diligently to identify the right path forward for the health system,” DCHS Board Chairman Bill Edberg said in a news release Tuesday. “I am hopeful that there will continue to be even stronger support from all stakeholders in helping our community continue to have access to quality health care close to home,” he said.

DCHS operates as a Michigan municipal health facility corporation under Public Act 230. It is owned by the county but receives no direct county appropriations or taxpayer support and has been self-sustaining since moving to its U.S. 2 facility in 1996.

In an interview with Bloomberg, Veda Partners health care analyst Spencer Perlman said rural hospitals face especially tough challenges. Besides problems in recruiting physicians, they have less room to negotiate with insurers and have to treat more older and poorer patients.

In response, some facilities are restructuring as outpatient emergency clinics with free-standing emergency departments. Others have downsized to “micro” status, reducing inpatient bed capacity to 10 or less.

In 2012, the former Cheboygan Memorial Hospital closed after a proposed sale to Flint-based McLaren Health Care collapsed because of federal certification and licensing snags. The deal was revived, however, and approved in federal bankruptcy court after McLaren and the U.S. Center for Medicare and Medicaid Services resolved their differences.

Six weeks later, the Associated Press reported, the slimmed-down facility reopened as McLaren Northern Michigan-Cheboygan Campus. It functions as a wing of McLaren Northern Michigan, a 202-bed hospital in Petoskey, about 30 miles away.

The Cheboygan facility no longer offers inpatient care but does provide access to primary and specialty care physicians, outpatient surgery and procedures, round-the-clock emergency services and rehabilitation and therapy services. A staff of 400 was cut by more than half.

Dickinson County Memorial Hospital is a 49-bed facility, down from 96, and further downsizing has been suggested. Eligible facilities can seek designation as a critical access hospital, which requires a reduction to 25 or fewer inpatient beds. CAH status can lead to better reimbursements from Medicare and Medicaid, but some hospitals have closed even after converting.

If a restructuring proves unworkable, or there is no turnaround, bankruptcy also is a possibility. A Chapter 11 filing allows an organization protection from creditors as it reorganizes, but it’s a complicated process — and likely a contentious one, as the court must adjust millions of dollars of debt among competing interests.

Jim Anderson can be reached at 906-774-3500, ext. 26, or janderson@ironmountaindailynews.com.

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