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IRON MOUNTAIN -- Dickinson County Healthcare System may need a loan of about $25 million to refinance its debt as it looks to solve its ongoing money woes, a restructuring consultant told county officials Monday.
"It just takes time, but we're moving in the right direction," Bart Stupak of Washington D.C.-based Venable LLC said at a hospital board meeting earlier in the day. The U.S. Agriculture Department's Rural Development Agency is a potential source of funding for the short- and long-term borrowing needed to see the hospital through its cash crisis, the former congressman from the region said.
Venable was hired Sept. 28 to oversee a DCHS restructuring and offer a turnaround plan. From the start, Stupak has said the hospital's problems likely can be resolved without bankruptcy or severe downsizing.
"You've paid all your bills on time; you still do," he said.
The hospital board accepted Stupak's recommendation to pay Berkeley Research Group LLC up to $75,000, plus expenses, for a feasibility study. That research, which could take about six weeks, will provide information for a short-term loan as well as data needed for turnaround strategies and refinancing, Stupak said.
Berkeley, a global consulting firm headquartered in California, has plenty of experience in hospital studies, including a recent reorganization at Helen Newberry Joy Hospital in the Upper Peninsula, Stupak said. Its fee was the lowest and the time to complete the study the quickest, he added.
Later, at a meeting of the county board, Stupak said he hopes to have an answer on long-term refinancing by the end of next summer, if not sooner.
Questioned by Prosecuting Attorney Lisa Richards if there are assurances DCHS can continue to meet its payroll, Stupak answered, "I think employees will always be paid."
Concerns remain, he admitted, about lower hospital use during the winter months and a $1.75 million note payable by the end of March -- both illustrating the need for a bridge loan, whether from USDA or a commercial lender.
Also, nearly $4 million of DCHS's money is held in escrow by Fifth Third Bank -- cash the lender could choose to release if it is satisfied with DCHS's financial progress, Stupak said.
County board Chairman Henry Wender asked if a feasibility study might result in recommended changes in management.
"It's fair to say everything's on the table at this time," Stupak said.
Parts -- but not all -- of the finished study could be made public, he said in response to a question from Commissioner Ann Martin.
Because DCHS is considered a subsidiary of Dickinson County, a letter of support from the county board would be needed for long-term refinancing, Stupak added. It's unlikely the county would have to be a co-signer, since the hospital has considerable collateral, he said.
Stupak expects to give a recommendation to the hospital board on a firm to conduct an appraisal of DCHS properties in another week or so.
Apart from its unfunded pension liabilities, DCHS has an estimated $2.7 million in assets above its debts, Stupak told the county board. "I've seen much worse," he said.