Clearwater Health Services deal causes concernsA deal due Dec. 31 for a Grand Forks health system to buy the county hospital and clinics in Bagley, Minn., has nurses and a former manager concerned enough to go public with criticism of the deal, while county commissioners remain rather quiet about it all.
By: Stephen J. Lee, Grand Forks Herald
A deal due Dec. 31 for a Grand Forks health system to buy the county hospital and clinics in Bagley, Minn., has nurses and a fired manager concerned enough to go public with criticism of the deal, while county commissioners remain rather quiet about it all.
Since Jan. 1, 2009, Cocoon Holdings of Grand Forks, owned by and affiliated with Aurora Medical Clinic, has been operating Clearwater Health Services, based in Bagley, under a contract for deed.
Clearwater Health Services, one of the few county-owned medical facilities in the state, includes the county’s Memorial Hospital in Bagley, with the attached CHS clinic; the Clearwater Ambulance Service; and the CHS Clinic in Clearbrook, Minn., which now carries the Aurora name. CHS has about 110 employees.
The terms were a price of $2.5 million, plus taking on operating debt of $1.26 million, for a total of $3.76 million.
Cocoon has paid down about $140,000 of the CHS debt and about $300,000 on the sale price, said former CHS manager Jon Brovold, who was terminated by Cocoon this fall.
County Commissioner Duane Hayes said a balloon payment of $2.2 million is due Dec. 31, plus all the remaining debt, which with the county’s rolling line of credit it extended to CHS, could be as high as $1.5 million, for a total of $3.7 million.
Questions raised by employees of the hospital and clinics and Brovold haven’t been answered by the county’s board of commissioners, the five members of which also sit on the CHS board of directors.
Dr. Tom Peterson, the psychiatrist who appears to be the principal owner of Aurora Clinic and Cocoon Holdings, as well as Monarch Management that runs CHS, didn’t return several telephone calls to the Herald.
Nor did Ashley King, Monarch’s manager of CHS in Bagley since Brovold was dismissed this fall.
Karen Stoker is one of 14 licensed practical nurses in CHS, and she works in the Clearbrook clinic. There also are 19 registered nurses in CHS, she said.
“The nurses’ main concern is we just don’t know that much about them,” Stoker said of Cocoon, Monarch and Aurora. “They are over there in Grand Forks, and we hear their hospital didn’t open and that it will never open.”
Plans announced two years ago for Aurora to open a hospital in Grand Forks haven’t come about. Altru Health System, the only hospital in town, opposed Peterson’s request for tax breaks for the proposed hospital.
Not against sale
Stoker has worked for CHS for 21 years. She said all the nurses, the two physicians and three licensed nurse practitioners who have worked at CHS for years, and other employees, seem united in their concern. Other nurses agreed with Stoker.
“We are not against the sale in any way,” said Stoker, who represents LPNs in contract negotiations. “We are just concerned that the pending deal is not a good one, to continue this as a sustainable and dependable health care system for our patients.”
Stoker said that the impression she has gotten is that, in fact, CHS revenues have been going to support Aurora activities in Grand Forks.
“From everything we have been able to gather, we don’t think they are financially sound enough to carry us as well as what they have in Grand Forks,” Stoker said.
In the past year, Aurora took steps to evict a physician who runs a kidney dialysis center in one of its buildings; the issue was resolved, and the dialysis continues.
Peterson, his brother, who also is a physician, and several other physicians affiliated with Aurora were sued by Cornerstone Bank of Fargo in August. Several hearings have been canceled, and the next is scheduled in January, according to state district court documents.
Brovold, who managed CHS for more than three years, first as an employee of MeritCare of Fargo, then under Monarch Management, said it’s been losing money this year.
He said the last published figures from a CHS board meeting showed that through the first nine months of the year, ending Sept. 30, CHS was $182,791 in the red, on total gross revenues of $11.88 million — $9.9 million from the hospital, $1.6 million from the Bagley clinic and $336,000 from the Clearbrook clinic.
That’s not a big deficit on such revenues, Brovold acknowledged.
But he said those figures don’t include a lease payment from the county back to Cocoon of about $43,000 a month, because of accounting procedures used.
He said Cocoon, after paying its $26,000 payment each month, still has made about $522,000 over the past two years from CHS. Plus, Monarch Management has earned a separate fee totaling $365,000 over the two years. It appears that nearly $900,000 has been spent on other things than CHS, or it would in CHS accounts now, Brovold said.
Stoker said John Nelson, county commissioner and chairman of the CHS board, had quickly called a special Saturday meeting of the county board for Dec. 4, then just as quickly cancelled it the night before with no explanation.
Nelson, who did not return several phone calls from the Herald, apparently had some promise from Peterson that he would show the county the money, Brovold and Stoker said. But it never happened.
Hayes, the county commissioner, made a motion at a meeting a month ago to block Cocoon from renegotiating terms of its deal with the county. It failed to get a second.
“We have a few options,” Hayes said this week in an interview. “We have a management agreement with them that ends Dec. 31, too. We could renew it or not renew it.”
Even under the worst case scenario, “everything reverts back to us,” Hayes said. “It’s a concern, but we are no worse off than we were a couple years ago.”
Hayes said he understands the nurses’ concerns. “But we are just following through on what our agreement (with Cocoon and Monarch) was. If they can come up with the money, we have to follow through. The nurses’ concern is the nurses’ concern. If I was an employee there, I would probably have the same concern.”
The county has owned the 25-bed hospital since it was built about 1955, Hayes said.
Often, the county has had to subsidize CHS; sometimes it makes money, he said.
For about 18 months in 2007 and 2008, Meritcare of Fargo managed it and improved things, Brovold said. But a deal to buy it fell through. However, Meritcare, under its new merged ownership, Sanford Health, has told the county it will do whatever it can after Jan. 1 to help out, Brovold said.
Two years ago, Cocoon made a good sales job to the county, Hayes said.
“They showed us a lot of pretty impressive paperwork. They were building a new hospital in Grand Forks. Yeah, they were a new company, but it looked like they had all their ducks in a row. Things have changed, evidently, since then.”
Reach Lee at (701) 780-1237; (800) 477-6572, ext. 237; or send e-mail to email@example.com.