The county manager and the chief executive officer at the Martha's Vineyard Hospital scrambled to contain the damage this week after the surprise revelation last week that the county will collect a $50,000 fee on an unusual contract that will funnel some $500,000 in taxpayer money into the hospital.

The taxpayer money is intended to help defray the cost of emergency services at the hospital.

"I knew about the fee. We have executed a separate contract about the fee," said hospital CEO Kevin Burchill yesterday.

"I just think of this as part of normal business," said county manager Carol Borer.

The remarks did little to cool the flareup of public opinion about the unknown $50,000 fee on a $500,000 public subsidy for the hospital.

"I knew nothing about this. There was nothing said about this at any of the town meetings. I think it is all ridiculous," said Edgartown selectman Fred B. Morgan Jr., who is also chairman of the hospital board of trustees.

"I was very disappointed to hear about this," said Roger Wey, an Oak Bluffs selectman who is also a county commissioner.

"I think in retrospect it was handled badly in terms of the communication with the public," admitted Robert Sawyer, a county commissioner who is chairman of a special subcommittee charged with managing the county contract with the hospital.

"But there is no question that the county will charge a fee," he added.

The county commission is now expected to take up the subject of the fee at its regular meeting next Wednesday night.

A news report about the fee surfaced last week. Jonathan Revere, a West Tisbury resident and well-known watchdog on community affairs, took the credit for uncovering the information about the fee.

The fee has not been part of any public discussion in the last two years surrounding the complicated project to collect public funds for use by the hospital.

First conceived by hospital trustees and later picked up by county officials, the tax subsidy for the hospital was structured by adopting a complicated inter-municipal agreement among the six towns. The inter-municipal agreement was a necessary legal device because state law prohibits the use of public funds for a private institution, except for charity care.

The inter-municipal agreement was approved by all six towns in a two-step process last year that ended with voters in each town approving their share of the $500,000 funding.

After town meeting approval, the county put out a request for proposals (RFP). Unsurprisingly, the hospital was the sole bidder, coming in with a bid of $495,000. In July the county commission voted to authorize the county manager to execute a contract with the hospital.

It is unclear when the fee became part of the discussion - or for that matter part of the contract.

County officials who were involved in the project do not agree on the sequence of events.

"If memory serves me right, I believe there is something in the inter-municipal agreement about charging a fee. I don't recall any public discussion about a fee, but it did come out at the meetings of the inter-municipal subcommittee. To the best of my knowledge, no fee has ever been decided," said Mr. Sawyer.

The county manager and hospital CEO had a different story.

"We have an agreement with the hospital that we will charge a maximum fee of 10 per cent. This is a contract and we do this for other grants," said Ms. Borer, who was in her office on Wednesday with Mr. Burchill.

Ms. Borer and Mr. Burchill said the fee agreement was not included in the original contract between the county and the hospital, but was in a separate contract. "We have a separate agreement for the fee," Mr. Burchill said.

Mr. Burchill and Ms. Borer said the separate agreement was signed about two weeks ago.

But a copy of the agreement provided to the Gazette on Wednesday is dated July 27. The full contract between the hospital and the county is also dated July 27.

It is unclear why there is a separate contract for the fee, since the fee would ordinarily be spelled out in the full contract.

Ms. Borer said at some point there was public discussion about the fee at a regular county commission meeting, but she was fuzzy about the time period.

"It was probably in the county manager's report - I have a list of things that I go over - and I probably said, ‘We have executed a contract,' and I am sure that in there I said we would get a 10 per cent fee. And I am sure that the county commission probably said, ‘Okay, good.' "

Mr. Sawyer's subcommittee has been meeting for the last year to develop the process for the contract between the county and the hospital, but the subcommittee only kept minutes of its meetings for four months, between July and October.

"There aren't detailed minutes, but we have been taking notes. The committee at one point said, ‘We don't need all this paperwork,' so we just took notes. Some were scratch notes," Ms. Borer said.

Mr. Sawyer agreed the subcommittee has not kept minutes of all its meetings. He said he regrets not having more clarity about the administrative fee for the county, but he said he does not question the need for a fee.

"The county has always had a policy for charging a fee to administer a town or county service," Mr. Sawyer said.

Mr. Burchill said the money for the fee will not come from taxpayers, but will come from hospital monies.

"We are going to get all $495,000 [of the taxpayer subsidy]. The fee is being paid through the terms of a separate agreement. We are going to pay the county a maximum of $49,500, and it's going to come from other money that the hospital has, from our checking account," he said.

Ms. Borer said the county has already incurred legal costs in connection with the inter-municipal agreement, although she could not say how much. She and Mr. Burchill both said the terms of the agreement include a requirement for detailed reporting of hospital statistics to the county. "There is a lot of work we are required to do; we are going to be submitting all this information, and the county is going to have to spend some time analyzing this information," he said.

But Mr. Morgan disputed the notion of added work in connection with the contract.

"All this talk about all this information that the hospital is giving to the county - that information is published every month. No one is going to have to work to get that - the hospital provides it. I don't know what justification they are using for charging that fee," Mr. Morgan said. "But as far as I'm concerned there is no defense. If this was a part of this it should have been made known to the voters from the beginning. And it wasn't."

Mr. Sawyer said he regrets the controversy. "I think the last thing in the world we need is a controversy over this issue. This is too important, and it's a pity to have this important effort for the hospital distracted by this," he said. Mr. Sawyer said he welcomes the move to bring the issue in front of the full county commission at its meeting next week.

"I just want this to be on top of the table - we need to discuss this and come to some conclusion," he said.