Ducktown has voted to co-sign a $1.4 million line of credit for Copper Basin Medical Center. The commission voted 3-0 to accept 25% responsibility for the debt. Copperhill will be asked to accept 25% and the county will be asked to co-sign for the remaining 50%.

Members of the Copper Basin Hospital District Board of Trustees and representatives of Brim Healthcare attended last week’s meeting to explain the plan to turn around the hospital’s financial situation. Attorney James Johnstone explained that he was retained by the District because of issues with the current lease with Copper Basin Community Hospital, Inc., which called for the District to accept the hospital’s debt at the end of the lease in 2011. The trustees said the lease was in default and began talking with hospital officials in hopes of avoiding a lawsuit.

Trustees also met with Brim, which specializes in fixing sick not-for-profit hospitals, Johnstone said. Brim officials joined them in meeting with Mike Stevenson of the hospital corporation, leading to an analysis of the financial situation. Brim officials concluded that it is possible for the hospital to be profitable and the trustees signed a three-month contract for the management company to begin the process, with the possibility of a long-term contract for management of the facility.

Before the trustees can take over, Johnstone said, they need financing to make the plan work. Ray Ford, Vice President for business Development with Brim, said the hospital is just barely cash flowing and is not operating to its potential. He said they feel there are enough patients, adding there is a lot of support for it to do pretty well, to grow, and to provide more services.

Ford said the surgery center needs to be opened, adding there is a grant that must be matched to make that possible. In addition, he said, the hospital needs to buy down the unpaid bills, which will make it possible to get the benefit of a group-purchasing program to save money in the future. Finally, he said, they need cash on hand. “Once we get there, I think we can stay current,” he said, adding, “We feel pretty good about it.” He explained that Brim is a privately held company. “Our success depends on the success of the hospitals we manage,” he said.

John Freeman, Regional Financial Officer, presented unaudited financial information on the hospital as well as projections for the coming year, noting audits are being done. He said the hospital has been breaking even in the last few months but not the last year so it “is in a deep hole.” The line of credit, he said, will allow them to dig out of the hole and make it profitable.

Freeman said they are projecting a loss for the fiscal year, which ends Sept. 30, but he said there could be a surplus in the next fiscal year under Brim management. Opening the surgery center will play a big role in new revenue, he said, as well as an increase in volume, better patient management, and savings on purchases. There will be a big cost increase in payroll and purchased services. Brim’s management fee would be $180,000, with another $20,000 for travel expenses. The trustees also have a contract with Johnstone, who will serve as liaison between the trustees and Brim.

Mayor James Talley asked about a time frame and Ford said the key elements are getting the audits finished and presented to the banks, as well as the guarantees by local governments. Once the approvals are in place, he said, they will need about a week to get an interim CEO and will be ready to begin putting the plan in place. The surgery center is critical, he said, noting the hospital would be in much better shape now if it was there.

Ford said they are meeting with local banks to present the financial information and the plan. The goal is a $1.4 million line of credit, not a fixed loan. He said they would probably draw down $700,000-$900,000 pretty quickly and hope not to need the rest. Freeman said payments will be made as soon as possible to keep the outstanding loan as low as possible.

Ford said they hope to negotiate with the vendors and possibly save 50¢ on the dollar on some of the unpaid bills. “We want to avoid the pain of bankruptcy,” he added.

Talley asked how long it would take for the hospital to operate on its own. Ford said there are unknown factors, such as changes in federal payments, but estimated it would be at least five years down the road. Joan Pack said co-signing the loan is better than the possibility of being liable for millions down the road.

Brad Miller said he was glad to see a plan in place. Pack said there are surgeons coming to see patients at the hospital but they have to go to Cleveland for surgery. Making it possible to do it at CBMC would make a difference, she noted.

Doug Collins thanked the hospital trustees and Brim, saying it makes him feel better to see progress and people who believe the hospital can make it. He asked if the local governments would get financial information. Trustee Keith Ballew said the charter calls for quarterly statements to be provided. Johnstone said they believe in open information, adding, “We have nothing to hide. That’s been the problem.”

Bea Tallent asked if a lawsuit is still possible and Johnstone said that is always a possibility if things can’t be worked out. “We’re hoping we don’t have to do that,” he said. She pointed out that the hospital is the county’s largest employer.

Talley said Ducktown wants to do what it needs to do to meet its obligation.