Written By: News Mississippi affiliate WQNZ and reporter John Mott Coffey
Natchez, Miss.- The country’s largest hospital chain today is expected to agree to buy Natchez Regional Medical Center from Adams County and provide $18 million to pay off the bankrupt facility’s debts.
Community Health Systems executives’ approval would follow the Adams County Board of Supervisors’ vote Thursday to sell NRMC.
“It’s a very positive thing for the county. After a lot of struggle, it puts health services on a footing where it can go forward,” said Scott Phillips, the negotiator tapped by county supervisors to find a buyer for Natchez Regional.
CHS owns Natchez Community Hospital but has not publicly said what it plans to do with NRMC and NCH.
Phillips said CHS has the money and strength to make much-needed hospital upgrades and recruit more medical doctors to Natchez, which has experienced a decline of health-care providers and services in recent years.
“This is the largest operator of hospitals in America, so I think they bring a good deal of skill and talent to us. We’ve ended up in a good place with this. It did take a fairly circuitous route to get to this place, but I think it is a very good place,” he said.
The county board decided in May 2013 to seek a buyer for the struggling medical center. A preliminary purchase agreement was reached with CHS in April.
There are still various steps ahead before CHS can acquire NRMC. They include bankruptcy court proceedings and an auction to give other hospital companies a chance to make a better purchase offer.
However, Phillips said he expects court approval and no other bidders so the sale to CHS can be a done deal by early October. U.S. Bankruptcy Judge Neil Olack will review the NRMC sale plans on Wednesday.
It’s uncertain what CHS’ plans are for NRMC and NCH, which have coexisted for 40 years in a community many consider too small for two hospitals.
CHS executives “want time to do an exhaustive study of how they combine the operations of the two hospitals,” Phillips said. “I can’t speak for CHS, but I have to believe that everything is on the table from their perspective – including significant capital investment or, mid-term, building a new hospital.”
A CHS spokesman has said the Tennessee-based corporation will not publicly discuss its plans for Natchez until a purchase agreement is finalized. The 179-bed NRMC and the 101-bed NCH employ a combined total of about 600 people.
Based in suburban Nashville, CHS has 208 affiliated hospitals in 29 states. It acquired Natchez Community in January along with 70 other hospitals bought from Health Management Associates.
CHS is agreeing to pay Adams County $10 million for the hospital and $8 million in prepaid property taxes that would otherwise be due to Adams County and Natchez over the next 17 years.
Most of this $18 million would be used to pay about $14 million owed to the Mississippi Development Bank for a bond loan it provided NRMC in 2006.
Getting revenues from the hospital sale to repay that loan has been a top priority for the Board of Supervisors, which faced having to possibly increase taxes on Adams County property owners to settle the debt.
“We want the loan paid first and get that wiped out because that covers all the taxpayers’ liability,” said county board attorney Scott Slover.
The rest of the money from the sale would be distributed through the bankruptcy court to other creditors. They include the hospital employees’ health insurance and retirement fund, which is owed $1 million, and food provider Valley Services, which is owed $527,000, according to bankruptcy court records.
NRMC’s debts total about $21 million. The hospital’s Board of Trustees filed for bankruptcy in March.
The NRMC board last year recommended the county Board of Supervisors sell NRMC as the best option to keep the hospital viable.
The county board’s purchase contract with CHS doesn’t specify what it must do to improve the hospital facility and how many doctors it will recruit, Phillips said, but the corporation knows what it should do to attract more patients in Natchez and make a profit.
“Their interest is very clearly to recruit doctors and upgrade the facilities. …. They want time before they commit to a specific physician-development program and facility-development program,” he said.
Phillips, who was NRMC’s chief administrator in 2008-2009, has noted the hospital land on Seargent Prentiss Drive is more spacious and better suited for new construction than Natchez Community’s site on Jefferson Davis Boulevard. NRMC was built in 1960 and has been expanded and remodeled since then. Natchez Community Hospital was built in 1973.
Phillips said he’s talking to Community Health Systems executives today for a final review of the purchase agreement for them to concur with the county Board of Supervisors.
“There are a couple of blanks in terms of dates and a few things that have to be put into the final document, but that is our expectation – that it will be approved and executed by both parties (today),” he said.
The five county supervisors approved the hospital-sale agreement Thursday in an hour-long meeting closed to the public. The supervisors adjourned to leave Phillips and Slover to provide information to the public.
Much of the supervisors’ discussions about the county-owned hospital’s sale have been behind closed doors since they decided to seek a buyer a year ago.
The main reason given for secrecy in the early phase was that potential buyers didn’t want their hospital competitors to know their plans. Secrecy now is needed so creditors don’t get tipped off too early before the proposed sale is presented to the bankruptcy judge, Slover said Thursday.
There is a “competing interest” between Adams County taxpayers and NRMC creditors for the $18 million the county would get from CHS.
“That’s why you don’t have all of this information public — what the strategy is and that kind of thing,” Slover said.
Taxpayers need most of the money to pay the hospital bond debt while creditors want what NRMC owes them.
“Until we get this filed in the court, we don’t want to give (creditors) any extra time that they can use to try to sabotage what we’re trying to accomplish here – and that’s first and foremost to get the bonds paid off so there’s no more tax liability. The second thing is to get all the creditors – unsecured and secured – paid off and satisfied,” Slover said.
The NRMC bankruptcy hearing will be at 10:30 a.m. Wednesday in the U.S. District Courthouse in Natchez.
While state law requires a public auction be held to sell NRMC, the county and hospital boards were allowed to negotiate with prospective buyers behind the scenes to make an opening bid. CHS emerged as the obvious frontrunner, Phillips said.
“At the end of the day, all said the best buyer was CHS,” he said. “We’ve heard that from the potential-buyer community already.”
“I don’t anticipate there will be other bidders, but the process is not intended to lock anybody out.”
Phillips expects the auction would be held in September and the sale to CHS closed by the end of the month or in early October.
“This will create that favorable hospital infrastructure, where you’ve got the combination of capital and management for the first time in many years to do that and also has the capital and the know-how to recruit physicians,” he said.
In agreeing to sell NRMC to CHS, the county board is going with the owner of a firm the hospital board previously sued for mismanagement. Quorum Health Resources administered the hospital from 1992 to 2008. The hospital board fired Quorum and accused it of leading the hospital into its first bankruptcy in 2009. The board dropped the lawsuit in 2013 in exchange for Quorum paying NRMC $9.7 million.
CHS acquired Quorum in 2007 as part of its purchase of parent Triad Hospitals.