DCHS secures $16.9M USDA loan for hospital
IRON MOUNTAIN – Federal officials have authorized a long-awaited $16.9 million Rural Development loan to enable Dickinson County Healthcare System to refinance its debt and acquire new equipment, hospital officials said Thursday.
The funding from the U.S. Department of Agriculture ensures that critical health care services will continue to grow for the Dickinson County community, DCHS President and CEO Chuck Nelson said during a news conference.
“We have been involved in this process for over two years and have experienced over the last year some fundamental changes, which allowed the USDA to revisit our loan application and approve us to go forward,” Nelson said.
The loan was granted based on the strength of DCHS’s strategic plan and the organization’s improved financial stability, he said.
“DCHS is fully committed — the board, the administration and the staff — to provide long-term quality health care for many years to come,” said Margaret Minerick, board chair.
Planned capital projects include a new linear accelerator, new CT scanner, new magnetic resonance imaging, facility improvement projects and information technology system upgrades, including an electronic medical records system.
“A loan of this size with a favorable interest rate is a huge victory for our entire community,” Nelson said. “DCH borrowed this money to ensure everyone in this community will continue to have long-term access to cutting-edge health care technology and facilities close to home. Now and into the future, people don’t have to leave the area for the critical health care services they require.”
The Dickinson County Board, community members and legislative leaders have all played a key role, Nelson said.
The loan has a 2.8% interest rate, said Brian Donahue, DCHS chief financial officer. “About half is going to refinancing our debt, so it’s going to allow us to have a lower debt service cost going forward,” he said.
Dr. Maryam Hamidi, radiation oncologist, said the linear accelerator is the latest version of the TrueBeam radiotherapy system and has superior capabilities.
“Previously we had to send (some) patients out elsewhere, traveling two hours or more,” she said. “But now we will have it available at Dickinson. It will be a very exciting time for us and really puts us at the forefront of leadership of cancer care for this region.”
At the time of its first USDA application in August 2019, the hospital reported $14 million in outstanding bank loans, including a pending balloon payment of nearly $10 million. But a request for a $26 million loan stalled as federal officials said they wanted evidence of financial stability through 2020.
As an alternative to federal borrowing, DCHS was prepared in early 2020 to sell $32 million in revenue bonds. That plan, however, was shelved a year ago when the coronavirus outbreak disrupted financial markets.
In August, the county board was informed the hospital again would seek a USDA loan, but this time for $16.9 million. The lower amount was made possible by COVID-19 assistance received through the federal CARES Act, as well as a better financial performance, Minerick said.
“The second submission, the USDA was very receptive because they saw what we had accomplished over the last two years,” Minerick said Thursday.
The hospital in the past year alone has hired 20 providers, including 14 physicians, four physician assistants and two nurse practitioners, Donahue said.
After three years of money woes, DCHS finances steadied in 2019, with reported net income of nearly $2 million. Last week, Donahue reported that 2020 ended with a positive bottom line of $3.7 million and 84 days of cash on hand.
“We are all celebrating this win for the people of our region,” Nelson said. “The financial stability that ensued over the last 12 months given the challenges that we were all faced with — COVID and other issues that are facing health care today — we did very well. I think the organization is much more energized and poised to do great things in years to come.”
In September 2018 — with losses totaling $21 million over three years — DCHS had hired Washington D.C.-based Venable LLC to oversee a restructuring and pursue federal borrowing. Earlier, Chapter 11 bankruptcy had been discussed.
Although DCHS is legally tied to the county, taxpayers have no financial liability if it should fail. That won’t change under the federal loan, although the county board agreed in 2019 to allow the hospital property to potentially be used as collateral.
The 27-acre parcel on U.S. 2 that includes Dickinson County Memorial Hospital and related clinics was purchased by DCHS for $700,000 in 1994. At that time, in exchange for the county approving DCHS’s request to seek revenue bonds for construction of the hospital, the county required it be deeded the property. It also directed DCHS to pay off the outstanding $500,000 balance of general obligation bonds on the former hospital on Woodward Avenue.
Under the 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 the county retained title and ownership to the property and buildings. Now, as part of the application agreement, the deed to the U.S. 2 property can be put in the name of DCHS.
Each year, DCHS treats about 160,000 patients and employs more than 650 staff members. Dickinson Memorial is 49-bed hospital with more than 60 active physicians.
USDA Rural Development provides loans and grants to help expand economic opportunities and create jobs in rural areas. This assistance supports infrastructure improvements; business development; housing; community facilities such as schools, public safety and health care; and high-speed internet access in rural areas.
News editor Jim Anderson contributed to this report. Terri Castelaz can be reached at 906-774-2772, ext. 241, or firstname.lastname@example.org. Jim Anderson can be reached at 906-774-2772, ext. 226, or email@example.com.