Former hospital board may face legal action

Published 12:04 am Friday, October 3, 2014

NATCHEZ — Natchez Regional Medical Center’s former board of trustees could face legal action as the formerly county-owned hospitals bankruptcy estate seeks funds to pay creditors.

NRMC is now in the hands of its new ownership under Community Health Systems, but the hospital board of trustees that helmed NRMC during its 2014 bankruptcy and sale will continue to exist as a separate entity until the bankruptcy is settled.

But while the board will function without funding or physical assets, the settlement approved in bankruptcy court Monday may allow for the recovery of some funds from the board.

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“We have reserved the right to sue, and we have got in our heads some questions that we think need to be resolved,” said Scott Slover, the attorney for the Adams County Board of Supervisors. “We are looking at what all the remedies are available.”

Adams County needs to recover funds to cover a $3 million line of credit taken out to cover costs associated with the sale, Slover said.

The county is likewise considering what to do about the unpaid balances of NRMC employees’ Public Employee Retirement System and insurance payments, Slover said.

PERS payments went unmade from November 2013 until the sale, though officials said in court Monday the PERS payments due post-bankruptcy petition would be made at the close of the sale.

Without the full matching payment from employers, PERS does not count employee contributions and employees will not get credit toward retirement even if they paid into the system themselves.

Slover said that while the county supervisors appointed the hospital board, the county can’t be liable for any suit filed against the trustees.

“The statute is set up so that the hospital board is a separate political subdivision, just like Adams County is a separate subdivision of the State of Mississippi,” Slover said.

“Our position is just because the county is an owner doesn’t mean they are liable for the board of trustees — it is very much akin to shareholders being liable to a corporation.”

The Rev. LeRoy White, chairman of the NRMC board of trustees, said if the board is sued it will not be on an individual basis but as a corporate entity.

But the chairman said he didn’t think there was a basis for a suit.

“We have audits that were filed with the plan that say we didn’t do anything criminal,” he said. “They looked and asked, did we do our fiduciary duties, all of that stuff, and they found we did.”

If the suit is filed, the board will be covered with its bond, which was paid annually, White said.

“All they are trying to do is gain more funds to pay more creditors,” he said. “When they find out you have an insurance policy, they are going to try to file a claim.”

White said any suit against the board would have to be filed by the estate’s liquidation trustee.

Slover said the trustees’ bond was for $1 million.

“There should be enough coverage in the mismanagement to get the unsecured creditors and the county significantly monetized,” he said.

Kenneth Lefoldt, the certified public accountant appointed to run the bankruptcy estate, could not be reached for comment Thursday afternoon.

NRMC’s bankruptcy was filed in late March, at which time hospital officials said the facility had a $3 million deficit.

The hospital was in the midst of a sale process. The $10 million sale to CHS closed Wednesday.

In order to cover the cost of the county-backed bonds that were required to finalize the sale, CHS also agreed to pre-pay $8 million in ad valorem taxes.