DCHS holds off on line of credit request
IRON MOUNTAIN — Dickinson County Healthcare System is suspending its request for a county-backed line of credit, citing an improved cash position, although staff reductions will likely be needed to balance the 2019 budget.
“We’re about $2 million short of a true break-even budget for 2019,” interim CEO Jeanne Goche told the hospital board Thursday. Decisions on savings, including an unspecified number of staff cuts, will be made over the next few weeks.
Apart from the retirement of otolaryngology specialist Dr. Ray Cameron, who won’t be replaced, and the previously announced closing of the Wausaukee, Wis., clinic, the hospital has no plans to curtail services, Goche said.
“I’m feeling a sense of relief. We have improved the cash situation,” she said.
A month ago, Goche and Venable LLP partner Bart Stupak had sought a $7 million line of credit from the county board. Stupak, who is leading the hospital restructuring, said the money could help keep DCHS solvent until it can secure long-term federal financing.
Goche said Thursday a consultant had predicted DCHS would be out of cash by the end of 2018, but she believes it’s now “good into March.” Besides managing costs and improving its revenue stream, several key developments have strengthened DCHS’s cash on hand.
Notably, Stupak was able to get an extension from the Centers for Medicare and Medicaid Services on a $2.5 million reconciliation payment from 2017 that came due last month.
“We actually could have written that check,” Goche said, adding Stupak’s success in gaining a three-year payment schedule “was huge in cash retention.”
Restructuring officer Dennis Smith also negotiated nearly $1 million in advance payments from Medicaid and other sources, while a $342,000 incentive payment was received through clinic arrangements with Bellin Health.
The Michigan Nurses Association has agreed to extend the economic portion of its current contract, which expires Feb. 28, until Aug. 28.
“I never expected that in a million years,” Goche said, adding the progress at DCHS is “because of employees being positive and working to achieve our common goals.”
Although a hiring freeze remains in effect, positions are being filled as necessary, particularly in primary care, Goche said.
In a press release, Stupak said the need for a line of credit may be revisited in the future. “It will just depend on the cash flow and as of right now, DCHS is OK,” he said.
Washington D.C.-based Venable was hired by DCHS in October to oversee a financial restructuring and offer a turnaround plan. Previously, the hospital was ready to explore Chapter 11 bankruptcy after two potential buyers pulled away from an acquisition.
Stupak always has suggested a bridge loan may be needed before long-term financing is obtained. The goal is to borrow $30 million or more by summer through the U.S. Department of Agriculture’s Rural Development Agency, pay off outstanding debts, possibly make new investments and map a course for profitability.
To that end, the accounting firm Eide Bailly LLP has been engaged to begin a five-year financial projection — a required element in the refinancing application.
Goche and Smith came to DCHS in early December, after the announced retirement of CEO-Administrator John Schon. An administrator for 35 years, Schon has ended his association with DCHS. The board Thursday approved a severance agreement that includes nearly $12,000 for expenses, plus compensation for 124 hours of paid time off.
Goche, an Iowa health care executive who has provided transitional leadership nationwide since 2008, is being paid $1,200 a day plus expenses. Smith, a consultant who formerly worked as president of the Upper Peninsula Health Plan, is contracted at $15,000 a month but with no expenses reimbursed, including work in Lansing and Washington D.C.
Goche said with the closing of the Wausaukee clinic effective Jan. 18, physician assistant George Wuensch will begin seeing patients at the Florence Medical Center three days a week. He also will see patients at the Dickinson Family Practice Center in Iron Mountain. The Wausaukee property will be listed for sale.
Finding an ear, nose and throat specialist to replace Cameron would be desirable, Goche said, but the recruitment process is so competitive it wouldn’t make sense right now. The immediate emphasis is obstetrics, pediatrics and family care, she said.
Smith said the interim team so far has focused on the hospital’s institutional issues but will soon give more attention to improving revenues from physician practices.
In other action, the hospital board reviewed a November financial report showing a $18,633 loss in operating income for the month. November’s performance raised the year-to-date loss in operating income to $4.1 million. After calculating non-operating revenue and expenses, the 2018 year-to-date bottom line through November is a negative $4.76 million.
A review of patient activity in November showed DCHS cared for 201 inpatients; 13,383 patients in the outpatient hospital setting, including 943 in the Emergency Department; and 10,666 patients in physician offices. Uncompensated care for the month totaled $514,649.