MACHIAS – The chief executive officer of Down East Community Hospital has resigned, effective Aug. 30.

Philo Hall, who has served in the top job at the Machias hospital since June 1999, will take another position within Quorum Health Resources, the company that manages DECH.

The hospital has been confronted with dual challenges this summer: an infestation of insects and a shortage of operating-room nurses. But a longer-term problem has involved a proposal to shrink the number of beds at the 36-bed facility in return for higher reimbursements for federal Medicare and Medicaid patients.

Hall has favored such a strategy, but faced strong opposition.

Reached at his home Thursday, Hall declined to comment on his decision, which he announced to the board of trustees earlier this week. Both current and past members of the board praised his leadership in the hospital’s news release.

Board president Carolyn Foster said Hall oversaw the implementation of case management at the hospital and installation of a new computer system, and he led the board in developing a strategic and financial plan that identified the imperative for change at DECH in response to changes in federal law.

“We appreciate his dedication and commitment to this community over the past three years,” Foster said. “We will miss him.”

Hall’s support for DECH to seek designation as a “critical access” hospital generated a storm of controversy among hospital staff and Washington County residents since it became public last October.

Hall said in an interview last fall that he believes a critical-access designation is the only way DECH can survive the new federal limits on hospital reimbursement from Medicaid and Medicare, the state and federal programs for the poor and elderly.

More than 70 percent of DECH patients are covered under Medicaid or Medicare. A critical-access designation would enable the hospital to receive higher reimbursements under those programs, but it would require DECH to reduce its number of acute-care beds from 36 to 15 and limit average patient stays to 96 hours.

The opposition of hospital staff and the community to critical access is based on the idea that limiting the number of beds at DECH would result in medical specialists leaving the area because they could not be assured access to their own patients.

Unlike other small rural Maine hospitals that have converted to critical access, DECH has more than 15 beds occupied more than half of the time, and the prospect of sending excess patients to hospitals in Bangor and Ellsworth was unacceptable to many physicians, nurses and community residents who jammed a series of public meetings on the proposal last fall.

The board postponed a vote on the proposal in response to the public sentiment expressed during those meetings, but said it would re-examine the proposal if the financial condition of the hospital did not improve.

DECH ended 2001 $60,085 in the black, but the critical-access issue rose again in June after Dr. David Rioux, one of the more outspoken opponents of critical access, was not nominated for another term on the board.

In June, after a group of local residents sponsored another emotionally charged meeting on the proposal, the hospital trustees created a task force to examine options to ensure the hospital maintained an operating margin that would allow for upgrades to the aging physical plant and maintenance and replacement of equipment.

Then, on July 16, the hospital discovered that springtails – a tiny wingless insect – had invaded its surgical suite for the second summer in a row. The operating rooms were shut down, contributing to what Hall said was a loss of $300,000 in gross income for July.

DECH reopened its operating rooms Aug. 13, but closed them again Aug. 15 after the insect problem resurfaced and due to a shortage of operating-room nurses. Hall said earlier this week that the hospital does not expect to resolve the staffing and insect issues before the end of August.

Dr. James Whalen, president of the DECH medical staff, member of the board and an outspoken critic of critical access, said Wednesday that a recent informal poll of the medical staff indicated only one person is in favor of critical access. Three were undecided and the others remained opposed to the proposal, he said.

Given the financial problems resulting from the operating room closures, Whalen said, he believes the trustees may vote on the critical-access issue at their Sept. 16 board meeting.

Foster said the consensus of the board is that a decision must be made soon, but that she is committed to letting the task force complete its work and make its recommendations.