NATCHEZ — The company that eventually agreed to purchase Natchez Regional Medical Center wasn’t originally interested, but the eventual cash price it offered was consistent through three different negotiating iterations.

Community Health Systems entered into an agreement with NRMC in which CHS would purchase the 54-year-old, county-owned health care facility, but how that agreement came about has been largely veiled from public scrutiny.

Hospital officials and their representatives with Healthcare Management Partners — the firm hired to market the hospital — offered some details of how the search for a potential buyer was going, but cited confidentiality agreements as a legal and business impediment to discussing parties and proposals connected to the sale process.

Some of those details were revealed in federal court last week during testimony that was meant to serve as background for motions the bankruptcy Judge Neil Olack was reviewing.

HMP Chief Executive Officer Scott Phillips testified when his firm took on marketing the hospital in July 2013, they identified 90 health care systems— including CHS — for solicitation for the sale.

After identifying two executives with each of those systems, HMP sent the executives information packages about NRMC, its potential for future growth in the health care market and the likely need for investment to make that growth happen.

The minimum investment needed to keep the hospital profitable would be $20 million in infrastructure and significant physician recruitment, Phillips said.

HMP received 12 responses to the initial solicitation. Ten were negative and only two — Health Management Associates and Mississippi Baptist Health Systems — expressed interest.

HMA was the owner of Natchez Community Hospital at the time.

At the same time, HMP started looking for a stalking horse bidder, keeping the initial pool limited to non-profit health systems within a 150-mile radius.

Solicitations to Oschner Health Center, CHRISTUS Health Systems, Baptist and Our Lady of the Lake all resulted in on-site visits by representatives, Phillips said, though representatives of St. Dominic Hospital in Jackson refused to even meet with the NRMC team.

In mid-September, officials announced three entities had met to discuss stalking horse negotiations, and later that month HMP Director Clare Moylan said three health care entities remained in discussion.

But one by one, with the exception of Baptist, the non-profit hospitals walked away.

“They weren’t ready to come to a town that is sized for one hospital and compete,” Phillips said during testimony.

Baptist remained interested, but was not able to provide the equity necessary for a full Natchez undertaking on its own, and set up a potential partnership with LHP Hospital Group of Dallas to finance the purchase, Phillips said.

Interest in the sale once again stopped short of a finalized purchase because of the issue of local competition.

“Baptist-LHP actually took the matter to the board and came back with an offer to purchase (NRMC) for $10 million on the condition they could buy the other hospital in the community,” Phillips said.

In early October, the chairman of NRMC’s board of trustees, the Rev. Leroy White, had characterized his feelings about the process as positive.

“We are just waiting for somebody to get ready to sign on the dotted line,” White said at the time. “(Potential bidders) are meeting with their boards of trustees. We are waiting for them to make their decisions.”

White declined at the time to name who those bidders were.

In late October, Phillips told the Adams County Board of Supervisors two bidders remained “very interested” in the hospital, but also declined to name who they were, and said two other non-stalking horse bidders had signed letters of intent to participate in the auction.

Negotiations with Baptist-LHP were ultimately unsuccessful. Friday, White said the board believed at the time Baptist would sign the deal.

“When that didn’t happen, it was hurting us because we thought Baptist was our No. 1 candidate,” he said. “They could provide the doctors and everything we needed for a hospital.”

The key to why the deal didn’t work out was HMA was not going to sell to Baptist, White said.

HMA was initially excluded from the stalking horse process — in which a company would commit to purchasing the hospital on the understanding that it would still have to go to auction — because it would likely invite problems from an antitrust perspective, Phillips said.

“If we went to them first, we would have had a problem seeking approval from the Federal Trade Commission,” he said.

“We had reached a point in November that the only purchaser who was qualified was HMA.”

HMP started a second phase of solicitations, reaching out to the 80 companies that had not returned a negative response during the first round, including Baptist-LHP, Phillips said.

The second phase of solicitations included sending out a 118-page memo detailing the hospital’s market situation and needed infrastructure improvements, a draft purchase agreement and the rules of the stalking horse selection process, which required systems to have at least $100 million in assets and $50 million in revenue.

“This is a relatively low hurdle,” Phillips said.

During the second phase, HMA contacted the firm and expressed interest, ultimately offering $10 million for the purchase.

In late January, White said an offer had been made for the hospital, but again declined to specify who made the offer. Friday, he clarified that the offer had come from HMA.

The offer was made only days before CHS closed the deal on HMA, White said

CHS was at the time in the process of closing a purchase of HMA, and Phillips told the court the offer was represented as being done with the knowledge of CHS.

“(CHS) contacted us, they said that was not authorized by us at CHS,” Phillips said.

CHS, however, decided to pick up negotiations.

“All the negotiations we had done with HMA, we had to do over again with CHS,” White said.

“Everything that had to be done, we thought we were ready to sign on the dotted line. We had to start all over again.”

The same issue that had made the market unattractive to other potential buyers was ultimately what piqued CHS’ interest. When CHS Vice President of Acquisitions Terry Hendon testified why he thought CHS is a qualified buyer for the hospital, he said having a presence in town through Natchez Community Hospital was a major point of qualification.

“We will combine the hospitals at some point in the future,” he said. “We would probably not be interested if we did not already have a presence in the community.”

The $10 million offer would have been “pretty catastrophic for us because it wouldn’t have been enough to retire the debt,” Phillips said.

CHS ultimately offered the same price as Baptist and HMA before it — $10 million.

The solution was to agree to the $10 million sale price and structure a pre-paid tax agreement in which CHS would pay $8 million in Natchez city and Adams County ad valorem taxes.

The $8 million figure was specific to what was owed on bonds, Phillips said.

“That was the net present value of $675,000 a year over the net interest rate of the bonds over 17 years,” he said.

With the approval of the appropriate state authorities for the tax structure, the agreement was pulled together and ultimately signed July 11.

White said the hospital was already in price negotiations with CHS when the board of trustees made the decision to declare bankruptcy.

“We didn’t have the cash to keep the doors open until the sale could close,” he said.

The board did not believe at the outset it would as difficult to sell the hospital as it was, White said.

“We thought it would be easy,” he said. “We had just done a study on this region and the 90,000 people the hospital could serve, and the potential revenue that could create.

“With that many people to serve, you can see the potentiality of a one-hospital town being able to make a lot of money if you bring in the right doctors. Where we were (with two hospitals), we were duplicating everything.”

But despite the bitterness of two near-sales and a bankruptcy in the middle of the process, White said he’s happy with the end result with CHS.

“If they hadn’t come through, I don’t know where we would be,” he said.

“I am happy that we are going to get quality health care, and we will be able to reduce those 5 mills for the citizens of Adams County.”

White was referring to a standby tax guarantee that could be triggered if the hospital ever failed to make its bond payment. The sale does not, however, reduce actual tax millage.

The auction that will finalize the sale — assuming no one outbids CHS — is set for 10:30 a.m., Sept. 11, at the Adams County Courthouse.

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.