Dickinson County Memorial Hospital. (Theresa Proudfit/Daily News photo)

IRON MOUNTAIN — Marshfield Clinic Health System has committed to a $26 million capital investment over the next five years as it prepares to assume control of Dickinson County Healthcare System.

An affiliation agreement between DCHS and Marshfield was approved Monday during a joint meeting of the DCH Board and Dickinson County Board. Once the deal is closed, the agreement turns hospital facility operations over to Marshfield, with input and oversight from a local advisory board.

Two names have been suggested for the new entity — Marshfield Clinic Dickinson and Dickinson-Marshfield Clinic.

“This is a good thing for our community,” County Controller Brian Bousley said. Independent attorneys have advised the county will “have no liability whatsoever once this transpires,” he said.

Monday’s meeting was public, but no agreement details were shared by hospital or county officials in advance. A resolution approved by the hospital board directs DCH CEO Chuck Nelson to negotiate final details, with closing potentially by year’s end or early 2022.

In a memo to the county board, DCH attorney Michael Celello summarized some key issues:

— For the first three years post-closing, any reduction in labor force must by approved by the local advisory board. The board will be comprised of five to seven members, including some current members of the hospital board, a representative of Marshfield, a physician and

one or two local community or business leaders. DCH employees will transition to become Marshfield employees.

— The advisory board, for a period of 10 years, must approve any decision to discontinue or substantially diminish any core service lines or the closure of a medical practice. The board will also be responsible for monitoring the operational functions and financial performance of the hospital as well as the development of strategic business and other plans.

— Dickinson Hospital Foundation will be given $1 million over a five-year period while also serving as an “enforcer” of the affiliation agreement. A subcommittee of the foundation will be charged with making sure Marshfield meets its $26 million capital commitment and related promises. The subcommittee will consist of the chief administrator officer of the new operation — likely Nelson — and several current members of the hospital board.

— Marshfield is taking responsibility for pension funding. Receiving pension payouts when still working will not be permitted.

In announcing the planned merger in October, Marshfield revealed plans to build a cancer center in Iron Mountain to bring more oncology services to the region. Marshfield is also expected to focus on expanding local outpatient surgeries as well as pediatric, primary and emergency care.

At that time, Dr. Susan Turney, CEO of Marshfield Clinic Health System, said the intent was to create a regional hub for care in the Upper Peninsula.

Margaret Minerick, DCH board chair, said she’s pleased Marshfield is making a commitment to DHC employees as well as facilities. “We feel our cultures are the same,” she told the county board Monday.

Nelson, in turn, said Marshfield has a positive and exciting plan to transform health care in the community and region. “We’re stable and we want to grow,” he said.

Commissioner John Degenaer Jr. said he supported the hospital’s decision to engage Marshfield but was unhappy the process was “secretive.”

At least three county board members knew nothing of proposed affiliation agreement until the day it was announced in October, he said. “This is shameful,” he said.

DCH Trustee David Holmes said the board had to be mindful of competitors who could affect the agreement, while Minerick said “keeping things close” helped ensure a successful conclusion.

Commissioner Ann Martin, who was among the board members briefed individually on the day of the announcement, said she was satisfied with DCH’s tactics and that a more public process “may not have gone so smoothly.”

A week before the Marshfield announcement, DCH closed on a $16.9 million U.S. Department of Agriculture Rural Development loan. Under terms of the loan, the county had agreed to give up the deed to its hospital property on U.S. 2, putting it in the name of DCH to allow it to be used as collateral.

The deed transfer was first authorized by the county in August 2019, when it put the property in escrow pending the USDA’s decision.

Pursuit of a USDA loan began in October 2018, when DCH hired Washington D.C.-based Venable LLP to direct a financial restructuring that would not require bankruptcy. That action came after two planned acquisitions of DCH fell through — Bellin Health of Green Bay, Wis., backed out in May 2018 and then Marquette-based UP Health System withdrew in September 2018.

In 2019, DCH sought a $26 million USDA loan but was rebuffed. As an alternative to federal borrowing, the hospital was prepared in early 2020 to sell $32 million in revenue bonds, a plan that also called upon the county to give up the U.S. 2 deed. That effort, however, was shelved when the coronavirus outbreak disrupted financial markets.

In August 2020, 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.

DCH operates as a Michigan municipal health facility corporation under Public Act 230. It receives no county appropriations or taxpayer support and has been self-sustaining since moving to its U.S. 2 site in 1996. DCH board appointments, meanwhile, have remained subject to the advice and consent of the county board.

Once the Marshfield agreement is complete, P.A. 230 will no longer be applicable to DCH operations, attorney Celello said. The current DCH Board will be dissolved, replaced by the advisory panel, which will have “real authority to protect the community’s interests,” he said.

Unlike the current hospital board, meetings of the advisory board are expected to be private.

DCH purchased the 27-acre parcel on U.S. 2 that includes Dickinson County Memorial Hospital and related clinics in 1994 for $700,000. At that time, in exchange for the county approving the hospital’s request to seek revenue bonds for construction, the county required it be deeded the property. Since then, it had leased the U.S. 2 site to DCH for a nominal fee.

Dickinson County Memorial Hospital is a 49-bed general medical and surgical facility. It has more than 70 providers on staff and more than 700 employees providing a broad range of acute care, including inpatient, outpatient, diagnostic and specialty services. DCH also has primary care clinics in Iron Mountain, Kingsford and Norway as well as Florence, Wis.

Marshfield Clinic Health System is an integrated health system with more than 1,400 providers comprising 170 specialties, health plan, and research and education programs. Primary operations include Marshfield Clinic, nine Marshfield Medical Center hospitals, Marshfield Children’s Hospital, Marshfield Clinic Research Institute, Security Health Plan and Marshfield Clinic Health System Foundation.