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Clearwater Health sale gets more time

BAGLEY, Minn. -- After a full day of meetings by two boards filled with angry questions and comments from as many as 50 people filling the room, the Clearwater County Commission voted 3 to 1 to grant Grand Forks physicians another month to come u...

BAGLEY, Minn. -- After a full day of meetings by two boards filled with angry questions and comments from as many as 50 people filling the room, the Clearwater County Commission voted 3 to 1 to grant Grand Forks physicians another month to come up with $3.7 million or so to buy the county's hospital, clinics and ambulance service.

One commissioner, John Chevalier, became ill and was helped out of his chair and taken to seek medical care, leaving before the final vote, which came after 3:30 p.m.; the commission began its meeting at 9 a.m.

Tuesday's long, at-times-dramatic, meetings -- which included loud claims at the end that one commissioner was too infirm to vote -- was the latest turn in the growing controversy over the contract for deed struck two years ago between the county commissioners to sell the county's Clearwater Health Services to Cocoon Holdings, owned and run by brother physicians, Drs. Tom and Mark Peterson, who founded the Aurora Medical Park, as well as Monarch Management that runs CHS.

And the simmering anger on all sides burst out now and then, including by a commissioner at the end of a long day, over the political cost and compromise he's been pressed into over it all.

"I just hope they realize the hell that we've been through," Commissioner Dean Newland, his face reddening and his voice angry, said pointedly to Ashley King, Monarch's manager of CHS, about her bosses at Aurora. "I'll tell you, they better get their shit together. Because I'm done. This is ridiculous. It's been going on too long."


Newland said most of his constituents in the southern part of the county support selling CHS, but he's still angry at Cocoon's months of not following through on promises to give them earnest money.

The Petersons did not attend Tuesday's meetings and have not returned calls from the Herald.

But they have put up a billboard in Bagley advertising the Aurora Clinic, the new name for the CHS clinic attached to the hospital. CHS also includes an ambulance service and a clinic in nearby Clearbrook, also identified as Aurora on the Aurora website.

Until this pending sale, CHS represented one of the few county-owned hospitals left in the state, Commissioner John Nelson said. But he said it costs the taxpayers too much money.

Since 1987, CHS has cost the county about $7 million, including the purchase price and assumed debt still owed by the new owners due now Jan. 31, Nelson said.

Cocoon and Monarch offer experience in the health field and can provide more providers and services, Nelson said, at no cost to the county government anymore. That makes it worth waiting longer for the deal to be consummated, he said.

Just recently, the Petersons have assured the commissioners they have an investor "with deep pockets," almost ready to show the money to finish the deal, Commissioner Tom Anderson said. "I have not seen anything in black and white," he said.

The drama included a midnight deadline approaching at the end of the week and the year.


Under the terms of a contract for deed signed two years ago that had been due Dec. 31, or Friday, Cocoon promised to pay $2.5 million for the land and buildings and CHS operation, as well as to assume about $1.5 million in debt that's been, in effect, rolled over since, interest free, by the county. Although Cocoon has paid off some debt and some of the principal, added deficits mean that $3.7 million still is owed.

But as it looked more and more this fall as if the Petersons would not be able to come up with the money, nurses and other employees of CHS began to voice concerns about the deal. On Tuesday, they crowded the commission room and made their opinions heard.

After two years, Cocoon and Monarch have shown they don't have the money to finish the deal, and are not running CHS with the same, hometown concern for patients and staff, said Bonnie Eck, an employee.

"You have to hold them to the letter of the law," Eck told the commission. "You have to draw a line in the sand and say 'This is it.'"

Jon Brovold managed CHS for 18 months under previous managing agency, Meritcare of Fargo, and 18 months under Monarch until he was fired this fall. He has been leading criticism of the county commission and CHS board for not more diligently checking up on Cocoon and Monarch.

"Why even entertain extending the contracts if it's such a mess now," Brovold asked the commission. He was replaced by Ashley King, the only Monarch/Cocoon official at Tuesday's meeting.

Even if the Petersons don't come up with the money Friday, declaring them in default would give them 60 days, under state law, to redeem the deal, said Clearwater County Attorney Jeanine Brand. That's why the commission, in addition to giving Cocoon another month to come up with the money, gave Monarch Management another 90 days, until March 31, to run CHS.

"Why not take the operation back and see what happens in 60 days," Brovold said. Meanwhile the county can examine other options, such as hiring Sanford Health to manage it, or sell it to them.


Nelson and other commissioners said because of the contract for deed, they were constrained from seeking other buyers or speaking doubtfully about Cocoon and perhaps getting accused of breaching a contract.

If Cocoon doesn't follow through by Jan. 31? "We're no worse off than we were two years ago," Nelson said.

The county commissioners met in the morning, then recessed to convene after lunch as the CHS board, which also includes two at-large members. David Johnson and Dr. Erick Reeber, a retired physician. Both Johnson and Reeber spoke strongly against the deal with Cocoon.

"Everybody was acting in good faith, and we did two years ago in selling CHS to Monarch and Cocoon and the Petersons. But that only goes so far," Johnson said.

In recent months, the Peterson brothers have not followed through or informed the board of what is going on at the hospital, Johnson said. "You better be suspicious. There's something going on here."

The only commissioner voting against the 30-day extension was Duane Hays, who has criticized the Petersons for not keeping the board more informed about their financial condition.

Ashley King, Monarch's manager of CHS, replacing the fired Brovold, told the commission that in October CHS ran a deficit of about $150,000, mostly because of too few patients, and in November ran a deficit of about $7,400, as patient numbers came up.

For the year, through Nov. 30, CHS rang up a deficit of $340,531, King said. CHS's annual budget is about $12.5 million.


Greg Leintz, owner of Galen's Super Value in Bagley, urged the commission not to give the Aurora/Cocoon owners any more time. CHS is more than just the dollars on the bottom line because it generates the salaries of 113 employees and brings lots of economic activity to the community, Leintz said. Having a Grand Forks owner will drain off some of that, he said.

"I think we have given them two years and if they don't fulfill (the contract for deed), we need to move on," Leintz said.

Dr. Andre Spence, who has worked as an internal medicine physician for the county for 15 months, attended part of the CHS board meeting because he says he's concerned that Cocoon Holdings don't have what it takes to keep things running well.

Gesturing at the hallway full of people waiting to get into the meeting, Spence said: "It's clear something is wrong."

Reach Lee at (701) 780-1237; (800) 477-6572, ext. 237; or send e-mail to slee@gfherald.com .

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