Entrance to Calais Regional Hospital in August 2019. Credit: Bill Trotter / BDN

A federal bankruptcy judge approved the sale of Calais Regional Hospital to its counterpart in Machias on Wednesday, a year-and-a-half after the Calais hospital began bankruptcy proceedings.

The order in U.S. Bankruptcy Court comes about a month after Down East Community Hospital in Machias said it planned to acquire the Calais hospital out of bankruptcy. The Machias hospital has been working with a committee of creditors to which Calais Regional Hospital owes millions of dollars.

The transaction is expected to close in June. Until then, Down East President and CEO Steve Lail said his hospital would manage Calais Regional Hospital under a court-approved arrangement.

Calais Regional Hospital is expected to become Calais Community Hospital when the sale is complete. The approval of the acquisition follows a year and a half of court proceedings for the hospital, millions of dollars in continued losses, hundreds of thousands of dollars in fees related to the bankruptcy filing and labor disputes.

The Machias hospital and creditors wanted to complete the deal before March 31 in part so the new entity in charge of Calais’ hospital could apply for a federal Paycheck Protection Program loan, which the hospital has been unable to do because it’s been in bankruptcy.

The new ownership hopes to bring several services back to the hospital, including full-time general surgery, Lail said last month. The hospital had cut services in recent years, including outpatient cancer care in 2018 and labor and delivery services the year before that.

“We are pleased with the court’s decision and are eager to get started,” Lail said Wednesday.

Todd Ricker, lead labor representative for the Maine State Nurses Association, which represents nurses and other staff members at the Calais hospital, welcomed the order approving the acquisition.

“We’re very glad that the new employer seems to be interested in working with us instead of against us,” Ricker said. “We look forward to a very productive relationship going forward.”

Calais Regional Hospital filed for Chapter 11 bankruptcy in September 2019 after several years of operating in the red, and it continued to lose money after entering bankruptcy, posting $4 million in losses in the 13 months after it filed for bankruptcy, according to documents filed in the U.S. Bankruptcy Court.

The hospital owes about $25 million to 1,900 banks, government agencies, businesses.

Under the court-approved deal, the entity owed the largest amount of money, the U.S. Department of Agriculture, would provide money needed to make the transaction happen. It would provide Down East Community Hospital with $1.5 million for startup costs.

In exchange, payments to the Calais hospital for services would all flow through the federal agency, and Down East would assume up to $5.7 million in debt to be paid off over 30 years. That amount is just more than half of the nearly $11 million the Calais hospital owes the agency.

A spokesperson for Calais Regional Hospital was not able to respond to a request for comment Wednesday afternoon.