The city of Sturgis last week voted to authorize city manager Andrew Kuk and attorney TJ Reed to authorize a letter of agreement among the city, Sturgis Hospital, Asker Corp. and Sturgis Building Authority, to sell the hospital for $3 million.
Asker is a non-profit health system based in Southfield.
The agreement states that, in exchange for the $3 million payment, the city will release the hospital from its sublease and associated securities connected with the lease.
If the transaction is concluded, before closing of the purchase of the hospital, the city would cease its tie to the hospital or any other party for future agreements, city manager Andrew Kuk said.
Commissioners discussed the Asker agreement during meetings Sept. 25.
The city still would be responsible for settling the bond situation, $8.7 million, or about $5 million after the sale is finalized. The $3 million from the sale would be placed into an escrow account and applied toward bond debt.
Asker initially agreed to pay $3 million to the city by Oct. 16. That was amended to Oct. 23, at the request of Asker officials. The city commission approved the revision at its regular meeting Sept. 27.
Within the past several months, Asker and Flint-based non-profit Insight have expressed interest in acquisition of the hospital.
In early September, Insight signed a letter of intent to acquire Sturgis Hospital at $3.3 million for 11 years.
In July, Asker had proposed paying $1.5 million up-front with $1.5 million over the following five years. Kuk told the Sentinel this week that the current offer has better “value” than the initial plan. Although it may not appear as attractive on the surface compared to the Insight offer, Kuk said it has lower level of financial risk for the city.
He said the letter of agreement provides a positive outlook.
“I would certainly say we have good progress toward final resolution, so that’s encouraging,” Kuk said this week. “We have this approval from the commission, now we’re dotting I’s and crossing T’s on the agreement.”
In early August, Sturgis Hospital received designation as a Rural Emergency Hospital. The designation was granted by Michigan Department of Health and Human Services and Centers for Medicare & Medicaid Services.
Key elements of an REH designation include enhanced emergency medical services, more convenient access to life-saving care, streamlining of patient transfer and potential for increases in federal funding.
As part of preparation for Rural Emergency Hospital designation, the facility ceased in-patient service. If Asker’s purchase is finalized, there is no guarantee the hospital would restart that aspect of care, but the possibility has been discussed at recent public meetings.
Asker is a for profit corporation – not non profit