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Clearwater Health Services to call deal in default with Aurora's Cocoon Holdings

BAGLEY -- The board of Clearwater Health Services, the county-owned hospital in Bagley with two clinics and an ambulance service, decided Tuesday after a special closed-door meeting to send an official notice of default to Cocoon Holdings and Monarch Management over the Grand Forks firms' failure to meet Monday's deadline to pay off a two-year-old contract for deed amounting to about $3.8 million.

John Nelson, chairman of the CHS board, which is made up of the five members of the Clearwater County Commission, plus one "civilian" member, said the county board would hold a special meeting at 1 p.m. Friday to vote on the CHS board's recommendation.

Once the Cocoon/Monarch owners - brothers and physicians Dr. Tom Peterson and Dr. Mark Peterson who also own the Aurora Medical Park in Grand Forks - have been served with the default notice, they will have 60 days to, in effect, redeem the defaulted contract, Nelson said.

In the meantime, Monarch Management will continue to run CHS, per the agreement the county commission reached a month ago to give the Aurora owners another month to come up with financing to finish the deal struck two years ago.

That didn't sit well with the 40 residents, many of them employees of CHS, who crowded the meeting room, firing questions at the board members and voicing criticism of Monarch and the Petersons.

But Tuesday's special meeting limited the board to talking in closed session about the expired contract for deed and did not allow the board to take any other action, Nelson said.

The CHS board will hold a regular meeting Feb. 14 to discuss its next steps with CHS. The county has owned the hospital for 55 years but, in recent years, has usually lost money on it, which taxpayers pick up, Nelson said.

It's one of the few county-owned hospitals left in the state, and there's a reason for that, Nelson said: Health care has become too risky, complicated and expensive to warrant running it on the county taxpayers' dime.

That's why the county inked a deal two years ago with Cocoon Holdings to buy it for $2.5 million for the property, plus about $1.3 million in debt, Nelson said. Cocoon still owes about that much and went into default at midnight Monday, Nelson said.

Last year, CHS did about $11 million of business, said Ashley King, who has managed it since fall for Monarch Management, after the Petersons fired Jon Brovold, who had managed it for more than three years.

That's more than the approximately $9 million it did in 2009, King said. But despite doing a higher volume of business, CHS lost about $300,000 last year, she said.

She's working to tighten up operations and cut costs, including renegotiating some of the medical fees paid to physicians who work for CHS, King said.

Several CHS employees asked the board Tuesday why a surgeon traveled to Bagley this week, resulting in a $4,000 charge to the hospital, even though Monarch and the physician were told by CHS employees there were no patients scheduled that day. It seemed like a waste of money, employees said.

King said there are contractual obligations to provide services and access to services that are involved in such decisions but that she's looking at ways to make sure fees are well-spent, including possibly renegotiating contracts with physicians.