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DCHS no longer on bankruptcy path

Ex-Congressman Bart Stupak is part of Washington law firm that will lead restructuring effort

IRON MOUNTAIN — Aided by a Washington D.C. law firm, Dickinson County Healthcare System is pursuing a restructuring that would not require bankruptcy.

The hospital board’s decision Friday to hire Venable LLP, with former Congressman Bart Stupak as the principal contact, drew praise Friday from County Commissioner John Degenaer Jr., who previously had called upon board members to resign.

“This is doing the right thing,” Degenaer said. “I think we can go a long way. This is a good hospital. People just need to use it.”

Venable, with more than 700 attorneys across the country, advises clients on business and regulatory law, legislative affairs and other issues.

“They will be making recommendations to the (hospital) board,” said DCHS attorney Michael Celello, who had been authorized Tuesday to recruit a bankruptcy counsel to guide the hospital through a Chapter 11 filing. That assignment took a different turn after conversations with Stupak, who helped restructure Mackinac Straits Health System in St. Ignace and is familiar with many of the challenges faced by DCHS, Celello said.

“The focus is now on a restructuring,” he said.

Celello contacted bankruptcy counsels across the country but recommended Venable, whose fee will be $150,000. He thanked the community for its advice and input in suggesting leads.

The hospital board met in a closed session for more than an hour before reconvening and voting unanimously to accept Celello’s recommendation, drawing applause in a packed conference room.

DCHS Board Chairman Bill Edberg said Venable’s offer is “pretty exciting” and “an opportunity to be positive and optimistic.”

“All the negativity has to come to an end,” County Board Chairman Henry Wender said. “I hope this all works out.”

Edberg cautioned, however, that Chapter 11 still looms as a possibility. “I don’t want to be misleading anyone,” he said. “There’s still a lot of work to do. The charge to the firm is to find us the best option.”

DCHS officials announced Sept. 18 that a potential sale to Marquette-based UP Health System no longer was being 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 UP Health after Green Bay-based Bellin Health withdrew in May 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.

Edberg reported Tuesday that DCHS had enough cash to last to the end of October, as well as potential access to $2.3 million held in escrow by Fifth Third Bank — money that was set aside by the Cincinnati-based lender during the acquisition talks with U.P. Health System.

“They don’t have to release those funds,” he said Friday, urging the community stay positive as DCHS tries to move forward.

Two DCHS employee unions Wednesday had called for hospital administrator and CEO John Schon to resign or be fired. Edberg declined Friday to address an audience question about Schon, saying the matter had been discussed enough Tuesday.

Schon spoke only to praise DCHS employees, saying they are responsible for the accolades it has received for patient safety. “We do have a great hospital,” he said. “We want to maintain that hospital.”

Kevin Pirlot of Iron Mountain, a county board candidate who had also called for new DCHS leadership, said Friday’s decision “is the best news” and the product of “opposite opinions working together.”

Susan Khoury, a DCHS retiree, said she was happy with the development but will remain “observantly optimistic.”

DCHS has a long history of delivering quality health care, Stupak said in a statement Friday.

“My partners and I at Venable LLP look forward to addressing the challenges currently facing the Dickinson County Healthcare System and the customers they serve,” he continued. “Our goal is to stabilize and improve the financial foundation of DCHS.”

Stupak said he hopes to meet with hospital officials and members of the DCHS Board on Tuesday.

DCHS operates as a Michigan municipal health facility corporation under Public Act 230. As such, it receives no direct county appropriations or taxpayer support and has been self-sustaining since moving to its U.S. 2 facility in 1996. The 49-bed hospital has more than 80 active physicians.

Under a 1994 deed, the county agreed to lease the U.S. 2 site to DCHS for a century, at the nominal rent of $1 per year, but retained title to the property and buildings.

With DCHS for now not on course for a Chapter 11 filing, the county will continue to keep a close watch on its proceedings, but no special meetings are planned in the days ahead, Controller Brian Bousley said.

A Chapter 11 filing allows an organization protection from creditors as it reorganizes, with the court eventually adjusting debt among competing interests.

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

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