Stark choices for hospital — sell or go bankrupt
A decision to sell Haywood Regional Medical Center is one that will impact the community for generations to come, county commissioners said Monday, and is one in which there are few choices.
"It's this or insolvency," Commission Chairman Mark Swanger said bluntly following a meeting where Janie Sinacore-Jaberg, HRMC chief executive officer, provided an update on the hospital's financial condition and proposed sale.
The hospital has been struggling ever since 2008 when it was decertified briefly as a Medicare and Medicaid provider. Operations are $8.6 million in debt, accounts payable are high,and there's a $2 million outstanding loan on the health and fitness center.
While it will be the first quarter of 2014 before any deal for a sale can be finalized, county leaders must sign off on the deal and are working to ensure their timeline won’t interfere.
Because the Haywood’s hospital started out as a public hospital, and then became a hospital authority, the county commissioners need to approve the sale and will retain the net proceeds.
The proposal recommended by the MedWest governing board on Sept. 24 is one from Duke LifePoint, which is offering a $62.5 million package in cash and long-term investment for the Haywood facilities that are part of the MedWest Health system.
Of that amount, $24.5 million will be cash at closing, and the remaining $36 million will be in investments paid for over the next eight years.
The offer made for WestCare, which includes hospitals and medical facilities in Swain and Jackson counties, was undisclosed because this is a private nonprofit entity. However, Duke LifePoint made it clear its offer was contingent on all the MedWest affiliates coming on board as a package deal.
At the Monday meeting, Sinacore-Jaberg told county commissioners the hospital board would hold a public hearing on Nov. 12, vote immediately after the hearing, and the MedWest board is scheduled to meet Nov. 13 to ratify the agreement and begin the process to finalize the deal.
The county will hold a public meeting on the intent to sell the hospital on Nov. 18, a public hearing on Dec. 16 and another public meeting on Feb. 3, 2014, at which time the board should have a definitive agreement to consider.
It’s a timetable outlined by County Attorney Chip Killian, who said he strived to structure a “parallel, yet separate track” in conjunction with the hospital board’s process.
“Meanwhile, we’ll be working on the development of a MOU and developing a definitive agreement,” Killian said. “The county will be part of both processes. We have a legal interest in hospital.”
Funds go to the county
Any funds remaining will revert to Haywood County after the debts are satisfied.
In addition, funds will need to be retained to pay off any legal claims against the system that aren’t satisfied before the deal is finalized, or that may crop up as a result of actions between now and closure.
In addition, said Sinacore-Jaberg, hospitals can be required to repay funds to the Medicare or Medicaid system several years in arrears, so funds to cover that cost will need to be set aside as well.
"It could be five or six years before the difference between the sale price and the liabilities is cleared up,” said Swanger. The board’s intention is to set up a permanent type of framework that ensures any additional funds realized from the hospital sale are dedicated to health care.
That purpose could be anything from education on an issue such as diabetes, which has long-term health implications in the community to helping the Good Samaritan Clinic to helping expand or establish a health-related curriculum at Haywood Community College.
Options are limited
Commissioner Kirk Kirkpatrick, who served on the governing board when MedWest was formed and who now serves on the HRMC board of trustees, spoke frankly about the hospital’s future.
“I want everyone to know how serious this is and how important it is for this be a successful venture,” Kirkpatrick said. “This used to be a county asset so we have a proprietary interest in it, but the most important thing is making sure when people need quality healthcare, emergency healthcare and expanded healthcare, we have a hospital in our county that can provide this. The boards of both have considered this and are trying to find the very best partner we can.”
Only two entities submitted a formal proposal to purchase the Haywood hospital and related medical facilities — Duke LifePoint and Pinnacle Health HealthCare Development, a Kansas-based physician-led group looking to operate its first hospital. Pinnacle offered a $57 million package.
While Mission Health made an offer for the WestCare portion of MedWest, an attorney for Mission released a statement indicating the current regulatory climate would make acquiring Haywood difficult.
Commissioners Mike Sorrells and Kevin Ensley both relayed their initial disappointment about the lack of an offer from Mission.
In thanking Kirkpatrick for his service, Ensley said his opinion about what should happen was initially different.
“He was right,” Ensley said. “I’m really disappointed in Mission.”
Sorrells said he, too, originally hoped to work something out with Mission, but knows the course being pursued will assure a strong, viable hospital remains in the county.
“The proposal they were trying to work out at Harris would have been detrimental to us,” he explained.
Swanger and Kirkpatrick, a Waynesville attorney, agreed legal and regulatory issues would be a legitimate concern if Mission tried to buy Haywood, but Swanger said he didn't believe they would be insurmountable.
Kirkpatrick questioned whether this was the real reason Mission bypassed its closest neighbor.
"Is that the primary reason they didn't want to buy us?" he asked, noting that ever since Carolinas HealthCare began managing MedWest, Mission has been recruiting physicians and opening facilities in the county.