MSHA looks to acquire Unicoi Co. hospital

Brad Hicks • Sep 26, 2012 at 9:53 PM

ERWIN — Since the first patient was admitted to Unicoi County Memorial Hospital nearly 60 years ago, the hospital has operated as a public, community hospital. But that may soon change, as the hospital’s board of control is set to consider a pending partnership between UCMH and a health care system in the area.

On Wednesday, the UCMH Board of Control and Mountain States Health Alliance announced that the board of control will hold a public meeting on Oct. 4 to discuss and vote on a letter of intent from MSHA to acquire UCMH.

At that meeting, which will be held in the boardroom at UCMH beginning at 5:20 p.m., members of the public will have the opportunity to hear details of the proposal before the board of control votes.

A vote by the board in favor of MSHA’s acquisition of UCMH would become MSHA’s 14th hospital in early 2013. A vote in the measure’s favor would also put an end to two months of discussion and community speculation surrounding the financially-struggling hospital.

MSHA Chief Financial Officer Marvin Eichorn said MSHA has been working with the UCMH Board of Control for the past couple of months. On Sept. 7, MSHA submitted its letter of intent to the UCMH board in response to the hospital’s request for proposal. Eichorn said UCMH’s request and MSHA submission of the letter of intent was precipitated by recent financial struggles at UCMH, that included a May agreement between the UCMH Board and the town of Erwin that saw the town loan the hospital $800,000 for operational expenses.

“It really sort of revolves around those events leading the hospital board itself to a conclusion that they really needed to look at affiliating with another health system in the market in order to ensure that provision of patient care can continue in the community, and we can continue and they can continue to provide a high level of patient care to the citizens of Unicoi County and the town of Erwin,” Eichorn said.

Some of the terms of the letter of intent, which will be available for public review today, include MSHA’s extension of a $1.5 million line of credit to support UCMH until it joins MSHA in early 2013, the acquisition of UCMH’s assets and assumption of its liabilities on the closing date, and a voluntary contribution from MSHA to local municipalities that will be split evenly between the town of Erwin and Unicoi County.

“After reviewing proposals during a series of strategic planning sessions, all the members of the board of control are in agreement that MSHA’s letter of intent is the one that we should present for public review and a vote on Oct. 4,” UCMH Board of Control Chairman and Erwin Vice-Mayor Glenn Tilson stated in a news release issued Wednesday. “We have a long-standing relationship with the leadership and hospitals of MSHA that has been beneficial to the citizens of Erwin and Unicoi County over the years. We believe that MSHA’s culture and resources will be a good fit for the future health care needs of our community.”

Another term outlined in the letter of intent is that MSHA will undertake a strategic planning process to determine the health care resources that best fit the needs of Unicoi County and, within the next five years, will construct a new inpatient facility in Erwin to reflect those needs. UCMH Interim Consultant CEO Jete Edmisson said this is the term that stood out most to him.

“What better way to ensure that the county is going to have health care for the long-term,” Edmisson said.

Erwin Town Recorder Randy Trivette, who commended the UCMH for its research and acquisition of proposals that have gotten the board to the point that it is ready to consider a letter of intent, said a partnership between UCMH and a larger health care system was necessary for the hospital to stay afloat as a stand alone. He said this was also recommended by consultants previously hired by the hospital to complete an overall operational analysis of UCMH.

“Based on what our involvement’s been and seeing what the trends are across the country and seeing what health care reform is pushing our country toward, it was going to be nearly impossible for Unicoi County Memorial Hospital to stand on its own,” Trivette said. “It needed a partner. It needed someone larger that could provide the needed services and provide those at a good, quality, efficient cost.”

Eichorn said the majority of Unicoi County is already served by either UCMH or MSHA through its Johnson City hospital or services it has helped initiate in Unicoi County. He also said, just as has been done in prior commitments between MSHA and other hospitals, those currently employed at UCMH would be brought on as MSHA employees or team members once the agreement is in place.

“From the city’s standpoint, we are happy that the jobs are going to be able to be maintained in Erwin and Unicoi County,” Trivette said. “There are a number of people who are good employees that work up there and have a heart for our community and for our citizens, and I’m excited and happy that they’ll be able to maintain their jobs and the work that they do for our community. I’m also happy that a viable, what I consider an industry in our community, is going to be able to stay operational, be able to meet its obligations, and provide a great, needed public service through health care in our community.”

Like Tilson, Eichorn said MSHA and UCMH have a long-standing relationship and that its acquisition by MSHA could bring services, such as speciality clinics and recruiting specialists, to Unicoi County. If the UCMH Board approves the letter of intent, a final agreement could be reached by the end of January, Eichorn said, adding that financial and legal due diligence would begin immediately.

“We’re just excited about the fact that, while we’ve enjoyed the relationship and sort of both parties being where they are, there’s more we think we can do together,” he said.

Assuming the partnership is approved, Trivette said the town would receive its money back from the May loan agreement.

“We had those stipulations put into the promissory note and our deed of trust that the city would get repaid if the hospital was sold or acquired by another entity,” he said. “Now that won’t take place until the final closing, and that will be part of the debt that Mountain States Health Alliance assumes from the hospital, and our taxpayers will be repaid that $800,000 plus interest.”

Wellmont Health System had also submitted a proposal to UCMH. Last week, Wellmont President/CEO Denny DeNarvaez said last week that Wellmont officials would be “disappointed” if UCMH opted to partner with another health care system, as she felt Wellmont would be in a better position to provide new business and not compete with another nearby hospital under its own umbrella, and would be able to better recruit and retain physicians.

“The bottom line is we are prepared to be a good partner to Unicoi County if they wish us to be, and we do think we’re probably in a better position to do that simply because we are not competing with ourselves whereas, frankly, Mountain States will be competing with themselves,” she said.

Unicoi County Mayor Greg Lynch said he reviewed the release sent out Wednesday and feels the possible partnership could benefit the county.

“Everything sounds good so far and, as long as we keep a real hospital and as long as everybody does what they say they’re going to, the deal they made will be good to save the hospital and continue serving the people of our county.”

MSHA President/CEO Dennis Vonderfecht stated in the release that MSHA was “honored” that UCMH leadership requested the letter of intent and that the relationship between the two was one of “trust and mutual respect.”

“We believe that MSHA’s existing resources and infrastructure can provide the stability that UCMH needs in order to continue serving the needs of Unicoi County residents,” Vonderfecht stated. “We look forward to continuing to work with hospital staff and the community to make UCMH the best hospital it can be.”

Recommended for You