Hospital officials hope to hear about MDA board decision

Published 12:06am Sunday, June 29, 2014

NATCHEZ — Natchez Regional Medical Center officials hope to hear back this week if a state economic development board will allow Adams County to treat the sale of the hospital as an economic development project, the hospital’s attorney says.

The county-owned hospital is in negotiations with Community Health Systems for its purchase.

To facilitate the sale structure of the county-owned hospital to CHS, the Adams County Board of Supervisors applied to the Mississippi Development Authority for the sale to be considered a Regional Economic Development Act (REDA) project.

Hospital attorney Walter Brown said he believed the board met Friday, but that they don’t usually issue a statement about REDA decisions until it has drafted the certificate of public convenience that goes along with it.

“These types of commissions and boards don’t usually issue their formal recommendation until everything meets the criteria,” Brown said. “I think they met, considered the application and voted on it, as well, but we haven’t heard anything yet.”

While most REDA projects use tax funds to pay bonds used to build new infrastructure, the NRMC REDA project will take tax dollars and pay off the hospital’s existing bonds.

The tax dollars in question will be paid at the time the hospital is purchased for at least $18 million. That total will include $10 million in cash and $8 million in pre-paid ad valorem taxes, an arrangement that Natchez city and county officials had to sign off on before they could file the REDA application.

The next step will be for the federal bankruptcy court overseeing NRMC’s case to approve the sale structure. The hearing for that matter will be July 3.

CHS has been in discussions with NRMC for the purchase of the county-owned hospital. The $18 million price is considered CHS’s “stalking horse” bid, or the binding base price for when the hospital goes to sale.

In the bidding process the county supervisors approved earlier this month, a qualified bidder would have to outbid CHS by at least $1 million, and every subsequent bid would have to outbid the previous bid by $100,000.

The $1 million initial overbid requirement is to cover the cost of the stalking horse. In stalking horse agreements, the stalking horse bidder has a built-in financial incentive in case they are outbid because of the presumed risk they are taking on by being the stalking horse.

Under the adopted rules, qualified bidders will have to be able to demonstrate they can take on the business of operating a hospital and have the capital to bring the NRMC facility up to standard and potentially replace it in the long run.

Once the bidding process is approved by the court, the board can adopt the finalized sale resolution — assuming at that time the asset purchase agreement has been completed — and the sale process can begin with an advertisement for bids.

Once the notice advertising the sale 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 a successful petition is not filed, the hospital can go to sale without further objection.

If no one outbids CHS, under the stalking horse agreement the company is required to purchase the hospital.