Hospital sale details become public in a 600-plus page agreement

By Vicki Hyatt | Jul 14, 2014

For those who understand high finance, the intricacies of the medical field and legalese, the 600-plus page agreement that details every aspect of the Haywood Regional Medical Center sale to Duke Lifepoint DLP will be a scintillating document.

For the casual reader, however, learning the sale will likely close at the end of July, that $36 million in improvements will be made to the hospital over the next eight years — strongly indicating Haywood will continue to have a local hospital — may be enough.

The legal name of hospital will become DLP Haywood Regional Medical Center, and the community’s hospital will become a for-profit venture that will pay both property and sales taxes.

Those involved in the negotiations say that the $29,127,823 purchase price is a meaningless number. That’s because the final purchase price on the day of closing will be adjusted according to a formula — subject to update — that includes accounts receivable plus a current portion of other receivables plus petty cash plus inventory plus prepaid expenses minus accounts payable minus accrued salaries/wages/payroll expenses minus deferred revenue.

That formula is just the tip of the iceberg when it comes to the complicated information contained in the hospital sale agreement that is contingent on closing simultaneously with Duke LifePoint's purchase of WestCare facilities in Jackson and Swain counties. HRMC and WestCare affiliated to form MedWest in 2009.

Details such as audited financial statements, the cost of insurance and claims history, lawsuits, a list of the various contracts/agreements and an exhaustive array of assets that will be part of the sale make up a large part of the sale documents.

While the WestCare purchase details are not public because those facilities were form as a private nonprofit organization, the HRMC details are part of the public record since the organization was formed as a public nonprofit entity.

For Haywood, the details became public information Friday with the announcement of the final public meetings required before the sale can happen.

One will be held in conjunction with the Haywood County Board of Commissioners meeting at 5:30 July 21 and another will be at 6 p.m. July 24 when the HRMC Board of Commissioners meeting will consider a resolution transferring ownership.

Mark Clasby, the MedWest board chairman who has been involved in the hospital governing operations for nearly a decade, said the agreement was reworked slightly after a June electrical fire that closed the hospital down, except for the emergency department, for three weeks.

The repairs, as well as payroll and lost revenue, are covered by insurance, and payments for those have regularly been coming in, Clasby said.

The sale includes the 169-bed acute care hospital, The Homestead, a certified hospice center, Home Care Services and other ancillary facilities, including the fitness center and other physician practices the hospital acquired in the past several years.

A provision of the agreement calls for $12 million of the proceeds being set aside in an escrow account that is to cover any costs not anticipated as part of the sale.

Some of these costs, said Clasby, could include items such as lawsuits that may arise from actions before Duke LifePoint took over, Medicare or Medicaid cost adjustments that the HRMC operations must repay if certain rules were followed or federal cost recovery efforts involving kyphoplasty being done as a inpatient as opposed to an outpatient procedure. Kyphyplasty is a type of surgery that re-inflates the spaces between vertebrae, and repairs the fractures.

The amount of funds to be set aside for future costs was a part of the negotiation.

“I think you can look at $12 million as the number both sides most comfortable with,” Haywood County Commission Chairman Mark Swanger said. “We understood Duke needed a comfort level that they weren’t buying a pig in a poke for a calamity that might be coming down the road. We don’t believe that calamity is there. If it is not there, maybe there will be $2 million more, and that is great.”

Both Clasby and Haywood County Commission Chairman said they doubted the county would have much beyond the escrow account left over once the final costs and revenues are tallied.

“Haywood County has never put one penny into that hospital other than indigent care money,” Swanger said. “The county guaranteed the bond to build it, and that was repaid through hospital profits. For us to get millions and the name of Duke, I’m not going to be doing much complaining.”

The agreement stipulates HRMC must pay $1 million to WestCare, something Clasby said was just "part of the negotiations to get the deal done." Also part of the deal is that WestCare will retain the physicians network business, something was was just easier to accomplish, he added.

The agreement stipulated core services now offered must continue for at least five years, that the hospital's indigent care policies shall be continued unless changed by the board of trustees, and that HRMC will continue to have its own chief executive officer, chief financial officer, chief nursing officer and public information officer unless the board of trustees approve a change.

All hospital employees that pass background checks and drug tests will be terminated as MedWest employees and become DLP employees with comparable positions and salary.

While the employees will no longer be able to contribute to the state employees retirement program, all vested funds will remain with the state for the employee to use upon retirement or may be rolled over into the DLP pension/benefit plan that will be offered.

The sale to DLP was approved last fall, and it was initially announced the deal  may close in the first quarter of 2014. Clasby said that deadline was far too optimistic.

"This is such a complicated deal. It's like trying to do 1,000 closings on a house. There are so many other things involved," Clasby said. "There were so many hurdles, and we just kept jumping over them to the finish line."

Any proceeds remaining from the sale must be used for health care needs in the county.

The HRMC Foundation will cease to operate on the day of the sale because it is illegal for a for-profit company to receive funds from a nonprofit organization. All funds and assets owned by the foundation will be retained by the new organization that will be formed.

 

Comments (3)
Posted by: David Woody | Jul 15, 2014 10:27

The word is "legalese," not "legalize."  The first is a noun, the other a verb.



Posted by: Vicki Hyatt | Jul 17, 2014 07:07

Thanks David,

As you can see, we've made the correction online.



Posted by: David Woody | Jul 17, 2014 14:42

I appreciate it.



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