Venable hopeful for DCHS’s financial future
IRON MOUNTAIN — Representatives of a national law firm guiding Dickinson County Healthcare System through a financial restructuring said Thursday they are optimistic its problems can be resolved without bankruptcy or drastic downsizing.
“I was surprised how good your financials look,” Bart Stupak of Washington-D.C.-based Venable LLC told the hospital board. “You have a balance sheet that doesn’t look that bad.”
Stupak, a U.S. congressman in Michigan’s 1st District from 1993 to 2011, acknowledged the hospital has cash flow troubles and long-term debt to settle but said it can remain “a strong, robust, heath care system.”
“I’ve been in (client) situations that are way worse,” added Stupak’s colleague, Andrew Currie. “Bankruptcy is the furthest from what we see right now.”
The board authorized Venable to seek a consultant for a feasibility study to evaluate revenue sources and expenses. It may identify services that should be abandoned, or others that might be added. The study will look at “every aspect of the hospital,” Stupak said.
“We will try to see what is the best possible solution,” he continued. “This is work that we do.”
Thursday’s meeting came 13 days after the board approved a recommendation from attorney Michael Celello to contract with Venable for $150,000. Celello had been authorized to recruit a bankruptcy counsel to explore a Chapter 11 filing, but his discussions with Stupak led to the current course of action.
Stupak said cash flow is the most immediate problem, even though no accounts are outstanding.
Bill Edberg, DCHS Board chairman, said enough money remains to see the hospital into late November or early December. In addition, DCHS has potential access to more than $2 million Fifth Third Bank has in escrow — money set aside by the Cincinnati-based lender during acquisition talks with Marquette-based U.P. Health System. That proposed sale fell through Sept. 18, about four months after Green Bay-based Bellin Health withdrew from an acquisition agreement estimated at $61 million to pay off both the hospital’s long-term debt and unfunded pension liabilities.
Stupak said the DCHS pension plan is 70 percent funded, while some others in the industry may be only 50 to 60 percent funded. “I don’t think it’s a deal-breaker,” he said.
He suggested U.S. Rural Development Agency as a source of funding if a restructuring goes forward, just as it assisted Venable client Mackinac Straits Health System in St. Ignace less than a decade ago. DCHS has a good deal of real estate, he added, most of it paid off, and overall assets greater than its liabilities.
Once a consultant is hired, a feasibility study may take eight to 12 weeks, and Venable will develop a turnaround plan in consultation with DCHS.
“We work for this board,” Stupak said. Some closed sessions may be needed, he added, because of sensitivities in renegotiating debts and other matters.
Dickinson County Board’s requested meeting with Venable tentatively has been scheduled for the evening of Oct. 22, Stupak said.
In other action, the hospital board:
— Reviewed a financial report showing net income of $51,000 in August. The hospital “continues to pay all of its bills when they come due,” said Trustee Jeffrey Campbell, finance chairman. Despite the recent monthly profit, the hospital remains more than $4 million in the red year-to-date. Inpatient volumes are down 19 percent from a year ago, while outpatient visits are down 5 percent. The hospital has reduced its staff by about 10 percent, or 85 full-time equivalent employees, mainly through attrition. Uncompensated care year-to-date totals $5.3 million, Campbell said.
— Nominated former trustees David Brisson and Margaret Minerick to fill two vacancies on the board. While there were other “really quality” candidates, the board was pleased to have two experienced and qualified applicants, Edberg said. The appointments are subject to the consent of the county board. Commissioner John Degenaer Jr. objected to the hospital board’s decision not to interview other candidates, saying he wants a “new direction.”
— In response to an inquiry about several doctors leaving DCHS, heard Edberg say physician recruiting is “a constant struggle, an ongoing issue and a high priority.”
— Heard Celello, also in response to an inquiry, reveal a consultant who led the hospital into the proposed agreements with Bellin and U.P. Health is no longer being retained. Newpoint Healthcare Advisors LLC had provided services at a reported fee of $20,000 a month.
— Received concerns and suggestions from Commissioner Barbara Kramer that came out of a listening session with citizens. Among the new ideas is forming a county advisory panel for DCHS.