Asker Corporation is in the forefront to buy Sturgis Hospital and lead the ailing facility into sustainability.
A series of meetings were held Monday in Sturgis, starting with a special Sturgis Commission meeting at 10 a.m., to guide the city through the initial process of authorize a letter of agreement between Asker, the city and the hospital, with a $3 million purchase offer.
The letter of agreement (LOA) would release the city from its financial ties to the hospital. The city in 2004 agreed to a bond setup with the hospital to fund upgrades.
However, in recent years the hospital has been struggling financially, has nearly closed multiple times due to monetary hardship, and had been looking for a buyer to bring the facility into a more positive cash flow.
The LOA as drafted would cut the city’s ties to the hospital, but as part of a pending agreement, the remaining bond debt would still be the city’s responsibility and not remain with the hospital. After a $3 million sale, set to be paid October 2, the remaining bond debt would be about $4.8 million.
Asker, based out of Southfield on the east side of the state, was represented Monday in Sturgis by Omar Elias. Elias told the city commission the for-profit corporation has performed due diligence on the hospital, has relationships with many of its speciality clinics and will determine the best way to increase or restore services of Sturgis Hospital.
Elias said the group would interview each hospital employee to make sure they had the proper fit.
The resulting vote to authorize city manager Andrew Kuk and city attorney TJ Reed to execute and authorize a LOA was unanimously passed by the commission.
How would the full responsibility of the bond payback be for the city over the next decade, asked the building authority panel.
“Pretty bad,” Kuk said. However, the city agreed to take the hit in order to make the hospital attractive enough to potential buyers. Cutting the bond obligation to a purchaser also increases the chance the hospital will be able to remain open moving forward.
Without a buyer, city officials said, the hospital’s closure was imminent, despite the rural emergency hospital restructuring. There was a delay on the state’s part to implement allowances for an REH to operate, and while the hospital cut inpatient bed services to save money and to prepare for its REH model, it was not enough to stem the red ink.
Ultimately, Asker Corp. and another entity, Insight, expressed interest in the hospital over the summer, with Asker setting up the process to buy the hospital after recent discussions with the hospital and city. Asker presented the hospital as a for-profit facility, while Insight proposed a non-profit model.
If no sale was put to the boards, the city would likely sell the hospital property, valued at $2.894 million, pay roughly $2.5 million in utility costs while a sale was pending, and pay out its debt service of approximately $4 million.
City officials said that, while there is no financially positive advantage to the city involving the hospital, the letter of agreement as worked out is the best scenario under the circumstances.
Dan Cherry is a freelance journalist for Watershed Voice.
