UPDATE: Clearwater Health Services to call deal in default with Aurora's Cocoon Holdings

BAGLEY, Minn. — The board of Clearwater Health Services, the county-owned hospital here, with two clinics and an ambulance service, decided Tuesday to send an official notice of default to Cocoon Holdings and Monarch Management. A special, closed-door meeting was held after the Grand Forks firms failed to meet Monday’s deadline to pay off a contract for deed amounting to about $3.8 million.

John Nelson, chairman of the CHS board, which is made up of the five members of the Clearwater County Commission, plus one “civilian” member, said the county board would hold a special meeting at 1 p.m. Friday to vote on the CHS board’s recommendation.

Once the Cocoon/Monarch owners — brothers and physicians Drs. Tom Peterson and Mark Peterson who also own the Aurora Medical Park in Grand Forks — have been served with the default notice, they will have 60 days to, in effect, redeem the defaulted contract, Nelson said.

In the meantime, Monarch Management will continue to run CHS, per the agreement the county commission reached a month ago to give the Aurora owners another month to come up with financing to finish the deal struck two years ago.

That didn’t sit well with the 40 residents, many of them employees of CHS, who crowded the meeting room, firing questions at the board members and voicing criticism of Monarch and the Petersons.

But Tuesday’s special meeting limited the board to talking in closed session about the expired contract for deed and did not allow the board to take any other action, Nelson said.

The CHS board will hold a regular meeting Feb. 14 to discuss its next steps with CHS. The county has owned the hospital for 55 years but, in recent years, has usually lost money on it, which taxpayers pick up, Nelson said.

It’s one of the few county-owned hospitals left in the state, and there’s a reason for that, Nelson said: Health care has become too risky, complicated and expensive to warrant running it on the county taxpayers’ dime.

That’s why the county inked a deal two years ago with Cocoon Holdings to buy it for $2.5 million for the property, plus about $1.3 million in debt, Nelson said. Cocoon still owes about that much and went into default at midnight Monday, Nelson said.

Last year, CHS did about $11 million of business, said Ashley King, who has managed it since fall for Monarch Management, after the Petersons fired Jon Brovold, who had managed it for more than three years.

That’s more than the approximately $9 million it did in 2009, King said. But despite doing a higher volume of business, CHS lost about $300,000 last year, she said.

She’s working to tighten up operations and cut costs, including renegotiating some of the medical fees paid to physicians who work for CHS, King said.

Several CHS employees asked the board Tuesday why a surgeon traveled to Bagley this week, resulting in a $4,000 charge to the hospital, even though Monarch and the physician were told by CHS employees there were no patients scheduled that day. It seemed like a waste of money, employees said.

King said there are contractual obligations to provide services and access to services that are involved in such decisions but that she’s looking at ways to make sure fees are well-spent, including possibly renegotiating contracts with physicians.

County Attorney Rick Mollin told the audience and the board that if the contract for deed isn’t canceled by serving notice of default, the alternatives are to sue the Petersons — who may not have the money to do the deal — or negotiate a new deal.

The plan the board settled on to give notice of default to the Petersons means “they walk away and we get everything back,” Mollin said.

Monarch still has a contract to manage CHS until March 31.

CHS employees asked the board and Mollin about “hiring and firing,” referring — without mentioning her name — to Monarch and King’s firing Friday of Celia Beck , who had been in charge of human resources and payroll for three years, Mollin, indicating he could not speak directly to any particular personnel issue, said that in his short tenure, the only employment issue he had to review seemed “consistent,” with the reasons given by Monarch Management.

Mollin took office this month after winning in the November election over incumbent Jeanne Brand.

Beck attended Tuesday’s meeting of the CHS board.

“I just want to see what happens,” Beck said. “I don’t know at this time what I’m going to do.”

She has been HR/payroll manager for three years and worked for CHS for a total of about five years, Beck said.

Monarch brought in Aurora employees from Grand Forks the past month to be trained in her duties, Beck said. “So, I knew this was coming.”

Those kinds of decisions, firings and management done from Grand Forks, concerns the employees, said Karen Stoker, an LPN who works at the CHS clinic in Clearbrook, Minn., and who represents the LPNs at CHS in union issues.

“I’m glad they didn’t give (the Petersons) any more extension,” she said. “The people that work here are apprehensive about what’s being done.”

With Beck, three employees in the CHS business office have been fired since October, Stoker said. “It’s been very stressful for everyone. We have had some people resign, just because, I think, of the environment there and the uncertainty of their jobs.”

CHS employs about 110 people.

Employees are not against the idea of selling CHS to a private health care firm, Stoker said.

“We are not worried about no longer being county employees. We are all for the sale. I’m a taxpayer, too. But it needs to go to someone who is going to keep the business here and will be here for our patients and be here for the people still working here.”

She’s heard too many stories about Aurora Medical Park and the Petersons having financial difficulties, Stoker said.

The Petersons were not at Tuesday’s meeting.

“I wish they would have been there to represent themselves,” Stoker said.

The Petersons have not returned repeated telephone calls from the Herald.

Nelson said he remains convinced the Petersons are acting in good faith and have the best interests of CHS and the community in mind.

“I think they believe in what we are doing here and they really want it to be successful,” Nelson said after the meeting.

Stoker said she hopes Sanford Health, the former Meritcare in Fargo — which managed CHS for about two years before the county struck the deal with Cocoon/Monarch two years ago — will get involved again in CHS.

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