MSHA releases revised bid for Unicoi Co. hospital purchase, including details for new facility in Erwin

Brad Hicks • Oct 15, 2012 at 10:30 PM

Mountain States Health Alliance President/CEO Dennis Vonderfecht said his organization’s original proposal to acquire the financially struggling Unicoi County Memorial Hospital was strong, but MSHA’s revised proposal ups the ante in its efforts to gain ownership of the facility.

MSHA released the details of its new 21-page acquisition proposal Monday. The revised MSHA proposal was also made available for public review on the organization’s website.

“Our proposal is clearly about serving the health care needs of Unicoi County residents,” Vonderfecht said Monday.

As it did in its initial proposal, MSHA has committed to assume UCMH’s financial obligations and debt, estimated to be more than $6.3 million as of July 30.

MSHA has increased the amount of the line of credit it would issue for UCMH’s use. MSHA is now committed to providing a $2 million secured line of credit to be utilized by UCMH “as necessary” for the period between execution of the letter of intent and closing of the acquisition transaction. This represents an increase of $500,000 over the line of credit MSHA offered in its original proposal.

The voluntary contributions to be provided to the town of Erwin and Unicoi County have also increased. In MSHA’s original proposal, a contribution of $1 million was to provided and split evenly between the two municipalities. In its revised proposal, MSHA is offering contributions of $750,000 each to the town of Erwin and Unicoi County.

A new item in MSHA’s bid to acquire UCMH is the commitment of $1 million to establish or fund a foundation for the purpose of “serving unmet health care needs in Erwin and Unicoi County. The details of this commitment would be agreed upon in the definitive closing agreement, according to the proposal.

“Certainly, there are needs Unioci County residents would have for health care as there is in every county, and we though that would be an investment very worthwhile to be able to put towards this proposal,” Vonderfecht said.

How MSHA intends to construct a new health care facility within the limits of the town of Erwin remained much the same from its original proposal. MSHA will conduct a comprehensive strategic planning effort to be completed within the first three years of its ownership of UCMH. This plan will include from community and health care leaders, and its objective is to define the services necessary to support the community’s health care needs and identify the facility needed to support these services.

“MSHA is prepared to commit to the construction of a new, state-of-the-art inpatient acute care facility in the town of Erwin to meet the needs of the Unicoi County residents consistent with the scope of services identified in the strategic plan,” the proposal states. It further states MSHA will look to repurpose any outdated UCMH facilities.

MSHA remains committed to employ all active UCMH employees and offer MSHA corporate staff services to the appropriate UCMH staff.

MSHA has also committed to continuation of all current UCMH operation, including emergency room, longterm care area and home health.

According to the MSHA proposal, closing date of Jan. 31 is anticipated and is to occur no later than Feb. 28.

Both MSHA and Wellmont Health System submitted proposals in September to acquire UCMH in response to requests for proposal sent out by the UCMH Board of Control on July 30. After the board’s executive committee opted to move forward with MSHA’s original proposal, which was made available for public review on Sept. 27, the board met on Oct. 4 in a public meeting to formally accept the MSHA proposal. However, after the meeting was opened to public comment, the board voted to delay acceptance of the proposal and voted to allow other health care entities interested in acquiring UCMH to submit proposals until Oct. 11.

Both Wellmont and MSHA submitted revised proposals last week, with Wellmont making its new proposal available for public review late last week. In its proposal, Wellmont has committed to assumption of UCMH’s more than $6 million in best, the issuance of an uncapped line of credit to sustain operations at UCMH, the expansion of services, a contribution of $600,000 each to Unicoi County and the town of Erwin, and the construction of a replacement hospital within the limits of Unicoi County within three years of the transaction’s closing.

“I still think it’s the superior proposal,” Vonderfecht said of MSHA’s revised proposal. “From our comparison of the two at this point, we’re putting more dollars into this than what Wellmont is. We’re also better meeting the requirements that the board set out in the original RFP in terms of the hospital being located in Erwin to serve the needs of Unicoi County residents and, obviously, the additional dollars we put in the city and county, as well as the $1 million contribution for better meeting health care needs in Unicoi County. I think all that places our proposal superior to that of Wellmont’s, even with them having access to our original one.”

Vonderfecht also said MSHA has a track record of volume increases at other facilities it has assumed ownership of. He said MSHA has a more than 20-year relationship with UCMH, which has provided it with access to a number of services.

“In Unicoi County, that’s meant over the years help with strategic planning, it’s meant help with physician recruitment, it meant working with them to put services, specialists, and so forth in Unicoi County Memorial, it meant including them in our managed care contracting networks,” Vonderfecht said.

Vonderfecht said in 2012, MSHA has seen around 2,100 Unicoi County residents for inpatient care, while Wellmont has not exceeded 40 county residents in any of the past three years.

He also said MSHA facilities hold 61 percent of the market share of Unicoi County residents.

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