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Published in Health Care
Sturgis Hospital in St. Joseph County is preparing to close and permanently lay off 194 workers if it is unable to secure new funding or a buyer. Sturgis Hospital in St. Joseph County is preparing to close and permanently lay off 194 workers if it is unable to secure new funding or a buyer. COURTESY PHOTO

Sturgis Hospital poised to close without new funding, buyer

BY Tuesday, June 28, 2022 05:42pm

Sturgis Hospital could close next month if it is unable to secure new funding or find a buyer, executives recently disclosed to the state.

In a notice filed under the federal Worker Adjustment and Retraining Notification (WARN) Act, Sturgis said it will begin to permanently lay off 194 employees “commencing on or around July 9, 2022, as services are eliminated.” The hospital could close all facilities and services “on or around” July 23 “unless circumstances change.”

The layoffs would occur “if the availability of sufficient funding is not confirmed by on or around July 1.”

The notice added that Sturgis Hospital “has been actively seeking capital, business combinations with other healthcare companies/investment groups, and other sources of funding to avoid a shutdown.”

Despite the June 20 WARN notice, Chief Operating Officer and Chief Financial Officer Bobby Morin remains hopeful that a resolution is possible. One outcome is an appropriation from the state Legislature as it finalizes a state budget by the end of this week to provide the hospital bridge funding until it can secure a permanent financial solution, Morin said.

“We’re looking for good things,” Morin told MiBiz on Tuesday afternoon. “There’s a chance to avoid it in the next three days.”

Morin attributes the St. Joseph County hospital’s financial crisis to a “plethora of things” that for years has led to operating losses, from pension obligations and higher operating costs and wages, to tighter reimbursements from Medicare and Medicaid.

The hospital has not been profitable since splitting from the city of Sturgis in 2010. The hospital leases the facility from the city, Morin said.

Securing bridge funding from the state could enable the hospital to seek approval from the federal Centers for Medicaid and Medicare Services to convert in 2023 to a rural emergency hospital designation that would lack inpatient beds. The move also could lower costs and make the hospital eligible for better reimbursement rates, Morin said.

Sturgis Hospital is licensed at 84 beds but has always operated with 49, Morin said. In 2020, the most recent year for which data is available, it operated with an average daily occupancy rate of just 1.6 percent of the 84 licensed beds, according to state data. The hospital’s daily occupancy rate in pre-pandemic 2019 was 3.6 percent.

The hospital has sought to find a buyer or partner since 2018, Morin said. Potential deals fell through, and when the COVID-19 pandemic hit, “everything kind of dried up,” Morin said. Backed by federal pandemic relief funding, the hospital was able to make it through the last two years, he said.

“We’ve looked for a partner and we’ve just reached that point,” Morin said. “We are still open to being acquired.”

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