MACHIAS – Down East Community Hospital leaders are proposing a corporate restructuring that would resolve problems that started years ago with the hospital’s $6 million subsidizing of Down East Healthcare Foundation.

That was never the plan for the foundation, a related yet separate operation that was intended to serve as the hospital’s endowment arm when it was formed in the early 1990s.

But when the foundation actually did things beyond its charitable scope, such as hiring four physicians and acquiring Sunrise Nursing Home, many were confused as to the foundation’s real purpose.

Wayne Dodwell, the hospital’s new president and chief executive officer, has been explaining the pending changes to the groups it will affect most:

. The hospital’s body of 99 corporators, who choose trustees.

. The boards of trustees for both the hospital and foundation.

. The hospital staff.

. The medical community.

All have been briefed in recent weeks.

As 2003 comes to an end, Dodwell forecasts that the hospital’s bottom line will end up $800,000 in the black. The hospital lost as much as $1.2 million in 2002, he said.

He said he could see no sense in maintaining the dual operations when he came on board 14 months ago.

“I started working on this idea in my head when I started here,” he said last week. “I said, ‘holy cow, this is an awkward structure that has to be fixed, having hospital money flowing out [to the foundation] at that rate.'”

The legalities of the new plan have been discussed with the hospital’s trustees twice. The will tackle it a third time at their Dec. 18 meeting.

The changes took shape after health care consultants identified problems by interviewing members of the hospital staff and the medical community starting last September. Dodwell has been working concurrently with lawyers on the plan’s legal details.

To the public, the inner workings of the hospital and health care community will appear much the same if both boards approve the plan.

The restructuring will create a single new parent corporation, under which the hospital and foundation will operate. It will take on a new name, such as the Down East Medical Center or Down East Health Services.

The four physicians who are now employed by the foundation will become employees of the hospital. That move should provide the hospital a $200,000 gain in reimbursement from Medicare next year, Dodwell said.

Sunrise Nursing Home in Machias, now owned by the foundation, will operate alongside the hospital and foundation as a third subsidiary of the parent operation.

“This is not a merger or acquisition of anything,” Dodwell said. “Legally it is called a corporate restructuring.

“This would not have happened if the foundation had pursued its original purpose and remained just an endowment arm. But it came to be such a financial drain, and it strained medical staff relationships when it hired the physicians directly,” he said.

Dodwell hopes the transformation, if approved by all involved, can be achieved by Jan. 1.

Trustees of both the hospital and foundation boards will meet on Dec. 9 for a workshop on the plan’s detailed implications.