Erwin board OKs $800,000 hospital loan

Brad Hicks • May 14, 2012 at 10:56 PM

ERWIN — The financially struggling Unicoi County Memorial Hospital is set to receive some monetary assistance from the town of Erwin in the form of $800,000 that both town and hospital officials hope is a “temporary loan.”

At Monday’s regular meeting of the Erwin Board of Mayor and Aldermen, the board voted 4-0 to enter into an agreement with the hospital that would see the hospital receive $800,000 in temporary funding that would be used for operational expenses. Alderman Gary Edwards, whose wife is employed by the hospital, abstained from the vote.

The measure approved by the board authorizes Town Recorder Randy Trivette and City Attorney Thomas Seeley III to work out an agreement with hospital CEO Jim Pate and begin work on it “as soon as possible.”

Trivette said Tennessee Code Annotated 68-11-50 allows municipalities to make contributions to not-for-profit hospitals, which would apply to Unicoi County Memorial Hospital.

Erwin officials were previously approached by hospital officials, who were seeking an $800,000 contribution from the town to supplement some of the hospital’s operating expenses, Trivette said. Trivette said he feels the hospital is important in the area’s economic development, as prospective businesses looking to locate locally may view the hospital as an asset. He also said the approximately 200 people employed by the hospital would be out of a job if anything were to happen to it.

“So I think it’s very vital and important for the town to try to assist in helping the hospital,” Trivette said.

Trivette also said the town has the funds available to provide the $800,000. This money, he said, was previously set aside in a money market account that is currently drawing 0.6 percent interest.

“One of the things we want to do is be good stewards of the taxpayers’ money,” Trivette said. “We want to make sure we’re following through with that and watching it. I think this entire board has been very diligent in watching the taxpayers’ money and has been very frugal in how we spend that money and how we put that money to use for the taxpayers. They’ve done a very good job, and that’s how come we’re sitting in the position that we’re in that we’re financially stable right now.”

According to Pate, a combination of the current economic climate, under-utilization of the hospital, consistently decreasing reimbursements from insurance providers and a government-mandated update to an electronic medical records system has led to the hospital’s financial crunch. When the hospital had to go to new financial and clinical software, it delayed the hospital’s billing for around 30 days, Pate said. However, Pate said once the hospital’s electronic medical records system is “up and running,” the federal government will provide the hospital with a payment that will absolve the debt associated with the upgrade.

The hospital has enacted a plan to address cutting expenditures and increasing revenues. Following Monday’s meeting, Pate said this plan includes cutting expenses however this can be accomplished, which included layoffs several weeks ago, and looking at other expenses. This plan also includes increasing revenue coming into the hospital by increasing patient volumes.

“I don’t want to wish anybody sick enough to have to go into the hospital, but I’d like to do your CTs and MRIs,” he said.

Trivette said the hospital’s plan should save it around $80,000 per month.

The town’s agreement with the hospital would come with three stipulations. The first is that the town would receive the hospital’s deed of trust for the real property at the hospital. The second is Trivette would meet with Pate and the hospital’s financial officer “as much as needed” throughout the month and update the board of mayor and aldermen on how well the hospital is adhering to its plan. The third stipulation is that a consultant specializing in hospitals and medical care would be hired to conduct a survey and audit of the hospital and would offer suggestions on how the hospital could improve its stability and recover from the economic downturn.

With these stipulations in place, Trivette said he is confident that the town’s financial contribution to the hospital will be no more than a “temporary loan.”

“One of the things I want to assure the board on is that I feel very confident about our money,” Trivette said. “That’s one of the things that concerns me and that I lose sleep over all the time is taking care of the city and the taxpayers’ money and reporting that to you.

“I feel confident with these things in place, the deed of trust especially, that the risk of losing our money is very slim. If we have the deed of trust, if something happened to the hospital, we’ve got the property that would get us our money back. If the hospital is sold, we would get our money back through the sale of the hospital. If the hospital turns around and recovers, we’re going to have a repayment plan put into this agreement that we would get our money paid back.”

Former Erwin mayor Russell Brackins, who serves on the hospital’s board of control, said the town was the appropriate governmental entity with which to enter into the agreement. He also said the town’s contribution would possibly prevent cost-cutting actions and would help preserve what he referred to as an “asset to the community.”

“We’ve got a good asset there that does provide quality care to our community,” Brackins said.

Trivette agreed that the hospital, which was constructed in 1953, is an asset to the community and said it must be promoted locally.

“I would hate as a citizen and as a representative of the town, an employee of the town, to just sit back and not do anything and see us lose that great asset and see us lose that ability to serve our citizens that way,” Trivette said.

After the meeting, Pate expressed confidence that the hospital would be able to return to more solid financial footing.

“I feel very confident that we’re going to be able to work out this thing,” he said. “It’s something that it’s not going to be an instant success. This doesn’t take care of all of our problems. We’re still going to have to continue to work at it, but I think if we can stay focused and we keep working at it, we can work out of this hole and we can get back on our feet.”

In other business, the board:

n Approved the first reading of an ordinance to rezone certain property along South Street from R-2 medium-density residential to R-3 low-density residential.

n Approved a resolution authorizing the issuance, sale and payments of capital outlay notes not to exceed $800,000 for various public works projects.

n Approved a resolution authorizing the application for a $255,000 Local Parks and Recreation Funds grant for the planned downtown skate plaza and playground.

n Approved a $265,272 bid from Summers-Taylor to complete road, curb and sidewalk improvements on First, Second and Third Streets. This is contingent on the bid meeting the required specifications of the work.

n Approved an operations and service agreement with the Unicoi County YMCA for the summer 2012 swimming season at the Fishery Pool. The pool is set to open May 26.

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