NRMC confirms CHS as interested buyerPublished 12:05am Saturday, April 26, 2014
NATCHEZ — Natchez Regional Medical Center confirmed Friday previous reports it is in negotiations with Community Health Systems, the parent company of Natchez Community Hospital.
The county board of supervisors — who must ultimately approve any sale of the hospital — have previously acknowledged entering into a letter of intent with a potential buyer, but heretofore the identity of the buyer has been kept secret.
A news release from NRMC Friday afternoon for the first time formally acknowledged the letter of intent was with CHS, which is the nation’s largest health system by number of facilities.
A letter of intent is a formal but non-binding agreement between parties acknowledging negotiations and committing to move forward with the discussion.
The next step in the sale process will be for the two parties to agree to an asset purchase agreement, which will be binding.
Healthcare Management Partners Chief Executive Officer Scott Phillips — a consultant who has been hired to serve as the lead negotiator for NRMC — said the asset purchase agreement negotiations could be finalized in two to three days.
Phillips said he misspoke when he testified in a court proceeding Thursday that the agreement could be signed in that time period.
“It may be a week or two before we get a signature on this, so I misspoke when I used the word signed,” Phillips said.
“We would hope to have it ready for the supervisors by (May 5). The buyer may or may not be ready to sign at that time based on whether or not they are done with their due diligence.”
The negotiations are down to “small things at the last turn,” Phillips said.
The content of the letter of intent — which includes a purchase price — has not been made public, but sources close to the sale process say it is for $10 million and an additional $8 million in pre-paid taxes.
The Natchez Board of Aldermen signed off on a tax-waiver agreement tied to the sale earlier this week.
Phillips said once the asset purchase agreement is finalized, it will be taken to the hospital’s board of trustees for review.
“The process we always follow is the hospital board reviews and recommends approval, but they are not the approving body,” Phillips said. “The supervisors have to approve it.”
If the supervisors approve the asset purchase agreement, it will be made public and the sale process will start with the publication of a legal notice saying the hospital will be for auction.
Once the notice is published, county residents have the option of filing a petition asking to take the sale to a voter referendum for approval. The petition would require 1,500 signatures to take the matter to a vote.
If no petition is successfully filed, the hospital can be placed for auction after 30 days.
At that time, CHS will be considered the “stalking horse” bidder. If no other company bests CHS’s negotiated price, the sale is automatically awarded to CHS.
Phillips said any bidder would be agreeing to CHS’s negotiated asset purchase agreement, with the only difference being the ability to increase the price.
Phillips said, however, he does not believe another bidder will step in as the hospital has already done an exhaustive process of evaluating qualified bidders. CHS would be allowed to bid higher if another company placed a better bid, he said.
“We are trying to expedite this process, but we can’t start the clock running on the auction until we get this document signed and approved with both parties,” Phillips said.
When the document is finalized, Phillips said the hospital will send out notices to 91 health care systems that have previously been notified of the sale offering that the auction will be taking place.
The Rev. Leroy White said he believes the proposal now on the table assures the Natchez community will continue to have access to high quality health care close to home.
“We’re confident this proposal provides for the best possible future, not only for patients and residents, but for the community as a whole,” White said.
Board of Supervisors President Darryl Grennell said the board has long understood change for Natchez’s hospitals was not only coming but necessary.
“I’m pleased this progress is being made,” Grennell said.
“CHS is a strong operator with considerable resources. Their proposal not only allows the county to exit the health care business, but brings significant benefit to the hospital and community as well.”
NRMC opened in 1960 as Jefferson Davis Memorial Hospital. Its $2.4 million construction was underwritten by an $800,000 local contribution and state and federal funds.
It has been financially independent since 1974 and does not receive tax support, but is backed by a 5-mill standby tax that the Mississippi Development Bank required the hospital to get in 2006 when it asked for the MDB to reissue its revenue bond.
The hospital board of trustees announced in February its intention to declare bankruptcy, citing at the time a $3 million deficit between financial assets and liabilities. The agreement to include $8 million in pre-paid taxes from CHS was done in part to ensure all of the hospitals debts were covered by the purchase.
The county supervisors appoint the hospital’s volunteer trustees. The board of trustees includes White, John Serafin, Dr. Linda Godley, Bill Ernst, Lionel Stepter, Lee Martin and Dr. Jennifer Russ.