Hospital Must Pay Current Bond Debt Through 2014
2002 Agreement Resolves Question
By Karen Gould

The question of whether Mackinac Straits Hospital will continue to pay on the hospital's current debt when a new facility is built was resolved Thursday, when county commissioners and hospital CEO Rod Nelson learned of a 2002 lease amendment committing the authority to paying on the $1.3 million bond debt to 2014, regardless of whether the hospital operates at the Burdette Street site.

The amendment was given to the county's legal team by the hospital's attorney just hours before county commissioners met Thursday, March 27. The agreement was made between the hospital authority and the county commission in 2002.

The document resolves the question of bond payment responsibility once hospital operations are moved to a proposed modern hospital campus near the airport on North State Street.

The bonds that financed an expansion of the hospital's Long Term Care Facility, were refinanced in 2002 at a reduced interest rate, saving $52,764 over the life of the bonds, as reported in The St. Ignace News July 23, 2002.

The hospital authority has been making the bond payments since then, although over the last few weeks, hospital leaders have indicated payments would stop once hospital operations are moved to the State Street facility.

The new hospital is scheduled to be opened in two years.

"The hospital has been mistaken in this issue," said Mr. Nelson, who attended the Thursday night commission meeting. "The hospital believed that once the hospital vacated the property, the bond reverted back to the county because the county owned that property."

Mr. Nelson had just finished talking with hospital attorney Roselyn Parmenter of Miller, Canfield, Paddock, and Stone in Ann Arbor, who had the document. Arriving at the county commission meeting, Mr. Nelson had not had time to advise the hospital board of the new development.

At the meeting, County Commission Chair Dawn Nelson had been faxed a copy of the amendment.

"The hospital is obligated to pay that bond off through 2014," said Mr. Nelson, "whether the hospital is there or not."

The lease amendment, which was signed by hospital authority Chair Ron Mitchell and then- Commission Chair Mike Litzner, requires that the authority make the more than $140,000 annual bond payment.

When faced with a financial crisis in 1991, the authority transferred all real property to the county and leased the site for $1 a year. Then, the authority agreed to reorganize operations and the county agreed to provide some financial support to the Long Term Care Facility, on as-needed basis. The facility later was expanded and the bonds were issued to finance the project.

In two years, when the hospital plans to move to the State Street site, the remaining bond debt will total about $800,000, and the authority will continue to make payments until 2014.

"We had always believed that if we had left, because we didn't own the property, that the bond payment was the responsibility of the county," said Mr. Nelson. "That's not true."

The new hospital will be a private, not-for-profit corporation and is being financed by ArborOne Financial of South Carolina and the U.S. Department of Agriculture (USDA).

News that the bond debt is the responsibility of the hospital will not affect the future of the new hospital, said Mr. Nelson, since the debt already was included in a feasibility study to justify the $26.8 million USDA Rural Development loan needed for the project, and $10.4 million in direct loans from the USDA in conjunction with ArborOne. The bond debt, said Mr. Nelson, was listed as a liability and added to the loan by accountants.

Funds to pay the bond already are included in the asset transfer agreement the hospital has drafted. The agreement is part of the transfer of assets and liabilities from the authority to the private corporation, Mackinac Straits Health Systems, that will run the new hospital.

Before the new hospital project can move forward, the transfer agreement must be approved by voters in the May 6 election. The transfer requires approval from residents of the authority's four controlling units, which includes the townships of St. Ignace, Moran, and Brevort, and the City of St. Ignace.

Commissioners agreed to authorize their attorneys to draft legal documents needed to clarify property ownership and payment responsibilities with the new corporation. Commissioners say they prefer the documents are finalized before the May election.

Attorneys representing the county are Bonnie Toskey and Richard McNulty of the law firm Cohl, Stoker, Toskey, and McGlinchey of Lansing.

Attorneys from both the hospital and the county already have begun productive discussions, Mr. Nelson said.

Also, commissioners say they still want representation on the new hospital board. Commissioner Larry Leveille volunteered to be the commission's liaison.

The Mackinac Straits Health Systems board will have to be expanded to 11 members in the next two years, said Mr. Nelson, to seat a majority of non-authority board members. To make the transfer happen, however, the board first is required to consist of a majority of members from the authority.

The board has said that a county commissioner would be favorably looked upon for one of the four available future board seats, Mr. Nelson noted. The role of a health care board member has changed, he said, requiring more political and fundraising experience.

During the public comment portion of the meeting, former hospital employee Patsy Gustafson said her concern is that the focus is being taken off long term care and geared to acute care at the new hospital.

The dynamics of long term care, said Mr. Nelson, have changed. A third of the long term care residents are from other counties because Mackinac County, he said, does not have enough residents to support the facility. Also, the length of stay has dropped significantly as patients are rehabilitated and sent home. Medicaid has added new restrictions to qualify for long term care and now turns down residents who might have been approved in the past. Long term care, said Mr. Nelson, is almost turning into a form of hospice care.

"We're getting residents at end of life," he said. "After they've been through home health, after they've been through assisted living, we're getting them at the last six weeks of their life."

The state has changed its focus, said Mr. Nelson, and is getting away from long institutional hallways and moving toward 12-bed pods. The new facility still will provide long term care, which is now referred to as "aging in place."

"I believe the tactics of keeping our board of commissioners and the residents of this county in the dark is underhanded, unethical, and leaning toward illegal," said Victoria Burnett, a former hospital employee. "It's our facility and our money they are playing with."

The next meeting of the county commission will be Thursday, April 10, at 6 p.m. in the annex building at the Mackinac County Courthouse.