Supervisors get ‘status report’ on hospital sale

Published 12:13 am Thursday, December 19, 2013

NATCHEZ — The attorney for Natchez Regional Medical Center’s board of trustees said Wednesday the hospital is working to structure a multi-party deal in an effort to sell the hospital.

The hospital board and administration met with the Adams County Board of Supervisors behind closed doors at the hospital for approximately an hour and a half Wednesday afternoon for what they termed as a “status report” about the sale.

Scott Phillips, the chief executive officer for Healthcare Management Partners, the consulting firm hired to help facilitate the sale, gave an update by videoconference.

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After the meeting, hospital attorney Walter Brown said discussions included efforts to reach a five-party arrangement, with two of those parties being NRMC and the board of supervisors.

Though Brown said the scenario was “one approach” being discussed, under a multi-party deal the hospital could be owned by one health care system and operated by a second one.

A similar arrangement was discussed during the attempt to sell the hospital in 2008, at which time it was proposed that health care company Essent Healthcare would buy the hospital and have Oschner Health System operate it.

If all goes well, the current discussion could result in a preliminary terms sheet being presented to the hospital board by the end of the year, Brown said.

The companies involved in the multi-party discussions have held the hospital board to strict non-disclosure agreement, and they cannot be named at this time, Brown said.

The terms would then be further negotiated, and — pending the approval of all parties involved — an announcement about the sale could be made by mid-January, he said.

“I give these dates cautiously, because it is not just the county board and the hospital board, but also the entities we are dealing with have their own boards to approve this as well,” Brown said.

Supervisors’ attorney Scott Slover said the meeting was at the hospital for the convenience of the hospital trustees.

“I know to some people it may have seemed like there were grandiose movements being made when they heard we were going to be meeting at the hospital, but really it was just a status report,” Slover said. “We have asked the hospital for more regular status reports because the board members are getting more questions from our constituents.”

Brown said the hospital is continuing discussions with another party outside the multi-party discussion in the event an agreement cannot be reached.

If the multi-party agreement is reached, Brown said the contract that results from those discussions will be considered the stalking horse bid.

Under the stalking horse model — which the hospital has opted to use with the blessing of the supervisors — a bidder negotiates a buying price for the facility, signs a contract with the county and puts down a security. When the hospital is officially placed up for auction, the stalking horse’s price is considered to be the base bid.

If no one outbids the stalking horse, the hospital will automatically be sold to the stalking horse.

Once a stalking horse bidder is negotiated, the supervisors have to approve the agreement. When the agreement is approved, the board will pass a sale resolution, which will be advertised for a month before the auction can take place.

During that advertisement period, residents have the ability to file a petition asking for the matter to be taken to a referendum. The petition would require 1,500 signatures.

The county started the sale process earlier this year after the hospital’s administration expressed concerns about the viability of being able to operate long-term as an independent, rural hospital in light of recent changes in national health care policy.

The hospital’s aging infrastructure also needs to be replaced — something administrators said an independent NRMC cannot do on its own — and the trustees and HMP representatives have expressed a belief that the hospital will not be able to recruit additional, needed doctors to the area without being part of a larger health care system.

NRMC was built in the late 1950s with $800,000 in local funds, the rest of its $2.4 million construction underwritten with state and federal monies. It opened in 1960 as Jefferson Davis Memorial Hospital.

NRMC does not receive tax support and has been financially independent since 1974, but it is backed by a 5-mill standby tax required by the Mississippi Development Bank in 2006 when the hospital asked for the MDB to reissue its revenue bond.