Down East Community Hospital (DECH) in Machias and Calais Regional Hospital (CRH) shared publicly on February 19 that DECH may purchase the Calais based hospital through Chapter 11 bankruptcy court. CRH has been in bankruptcy proceedings since September 2019.
     CRH Director of Communications DeeDee Travis says, "The board of directors generally supports the draft plan being submitted by DECH. With several details still to be worked out between the parties, no specific details are available to be released at this time. Our understanding is that a quick timeline is desired." She adds, "The CRH board and administration's ultimate goal is to ensure that the community will continue to have hospital services close to home, and [they] are dedicated to stabilizing the hospital and providing high quality healthcare to the region now and in the years to come."
     The plan submitted by DECH to the bankruptcy court suggests that reaching an agreement prior to March 31 is an essential component to the plan in order for DECH and the renamed Calais Community Hospital to access the federal Paycheck Protection Program (PPP) by that program's deadline. Currently CRH is not eligible to apply for PPP funds because of its Chapter 11 status, although it has received, as of October 31, $4.6 million in federal stimulus payments since the onset of the COVID-19 pandemic. The filing states, "If the plan can be confirmed and the effective date occurs before March 31, 2021, a significant source of value, perhaps in excess of $1.7 million, will be unlocked and available to continue hospital operations, preserve jobs, maintain patient care and maximize creditor recoveries."
     The bankruptcy court filings show that CRH maintains a significant amount of debt and as of September 2020 had total liabilities owed of over $20 million. A portion of that debt is associated with the hospital's new building that opened in 2007, with funding received in 2006 including a $13.7 million U.S. Department of Agriculture (USDA) loan, a $5 million loan from Katahdin Trust Company (KTC) and an additional loan and line of credit from the First National Bank of over $1 million. The long term debt owed by CRH is currently $14.55 million. In addition, the largest unsecured creditors are: Blue Water Emergency Partners of Calais with $335,300 owed; Anthem, owed $512,430; Quorum Health Services, owed $443,600; Zimmer US Inc., owed $243,700; and CPS Inc., owed $218,000.

History of serving, but losses mount
     Calais Regional Hospital, which was formed in 1917, has had a few different homes over the years, but the complex that it's known for today had its grand opening in July 2006. It replaced a 1962 building that had seen better days. At the 2005 groundbreaking, Michael Aube, state director of USDA Rural Development, said, "The replacement hospital is important to the community, as it will be significantly more efficient than the existing facility and better able to meet the needs of the 16,000 people in its service area."
     CRH operates a 25 bed general medical and surgical hospital, employs approximately 259 people with about 216 full time equivalent positions. In 2018 there were a total of 38,013 inpatient, swing unit, emergency department and outpatient visits and a total of 652,988 patient procedures performed.
     According to financial records kept by the Maine Health Data Organization for fiscal years 2014?2018, CRH has struggled with losses for many years and had a net operating loss of $2.69 million in 2014, $1.81 million in 2015, $1.27 million in 2016, $2.24 million in 2017 and $680,408 in 2018. While DECH saw operating losses in 2014 and 2015, in 2016 through 2018 it has operated in the black.
     DECH's plan to purchase CRH outlines the potential consequences if its plan were to be declined, stating that if CRH were to propose a plan to reorganize to a higher monetary value to some of its creditors, this would not be of benefit. "The debtor's existing management would retain control," the bankruptcy court filing states. "This is significant because the debtor has experienced many years of operating losses under current management" and in addition, "both KTC and USDA have negotiated a treatment under the plan that is acceptable to them and support the plan." One of the provisions outlined in the plan is that USDA would provide at least $1.5 million to DECH to help with the transaction, with certain conditions included for payment of the USDA debt.
     After the 2019 CRH bankruptcy filing, Travis noted that the hospital's financial challenges stemmed from many sources, including lower patient volumes, decreased reimbursements, an increased rate of free care and bad debt, rising regulatory requirements and a difficulty in recruiting permanent providers. "The business of healthcare today is very complex, so you can't just pinpoint one or two issues," she said. The financial challenges caused the hospital to close its obstetrics unit in 2017 and then its cardiac rehab department and an outpatient center for cancer patients. Last April CRH also announced a 10% reduction in staffing.
     Meanwhile, the use of CRH services has seen a steady decline. Acute admissions declined from 900 in 2015 to 500 in 2018, and emergency room visits declined from 10,750 to 9,450 during the same time period. CEO Rod Boula had also explained that the Medicaid reimbursement method had limited reimbursement amounts to CRH to about 38%, while most hospitals in the country operate at 70% or higher.
     Then in 2020 the effect of the COVID 19 pandemic added to the challenges. In April 2020 CRH had seen the number of patient visits drop by nearly half. Travis said at the time that the hospital "operates on a very small operating margin. Remove almost half of the revenue, and it is pretty easy to imagine this could quickly turn into a crisis."

Consolidation seen as a solution to extraordinary challenges
     Of the proposed acquisition, Steven Michaud, president of the Maine Hospital Association, explains, "This kind of consolidation is happening because of the extraordinary challenges facing rural hospitals -- population declines in rural areas, declining reimbursements to hospitals from the federal and state governments as well as commercial insurers, escalating costs -- in particular the need to recruit and retain physicians and other healthcare caregivers -- let alone the COVID-19 pandemic. They are all adding up to extraordinary pressure on our rural hospitals. It really cannot be overstated what they are facing." He adds, "The hope is this kind of proposal in Washington County will stabilize the hospitals and in fact allow them to thrive. They not only are the backbone of healthcare services, they are major employers and a source of economic activity that is vital to an area like that. This should give hope to the workforce up there as well as for the citizens of the county that healthcare services will remain vibrant and jobs secure."
     DECH President and CEO Steve Lail says, "Our plans are for the facility to remain a fully functioning hospital, and we hope to bring back full time general surgery, add primary care providers and eventually bring additional specialties that will benefit all of Washington County." He adds, "We took on this endeavor because we strongly believe that having a thriving, financially stable hospital in Calais is crucial if the healthcare needs of all those in Sunrise County are to be met."
     DECH stresses that it wants to maintain a fully functioning hospital in Calais. Lail says, "Our leadership team that has facilitated years of positive growth at DECH will oversee both hospitals. They will establish financial integrity by improving profits while reducing overall expenses, and they will lessen the administrative burden. Calais wants a hospital for the long term, and so do we. We will bring all the skills and tools we have used to strengthen DECH and use them to rebuild and strengthen sustainable healthcare services for the people of Calais and neighboring towns." He adds, "We will be two hospitals, with one team and one focus."
     Some CRH employees are represented by the Maine State Nurses Association, which states that nurses and other employees at CRH are hopeful the sale of the hospital will bring a new era of cooperation and respect for the staff. "We are hopeful that this is a new beginning for our hospital," says Alison Monaghan, RN and union steward. "This has been a long road for all of the employees and for the community that we serve. We are ready to help put our hospital on a new path where everyone's voices are heard."
     "Our patients are our neighbors, our friends, our relatives," says Anne Sluzenski, RN and union steward. "They have seen resource after resource taken away from them over the past several years without anyone asking for their input or opinion on these decisions that affect their health and well being. We stand with them in wanting to make sure that we have a healthy and productive relationship with the new leadership of our hospital. That can only happen when we are all respected and heard."