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Update: Tenn. attorney general delays sale of Unicoi Co. hospital

June 25th, 2013 5:01 pm by Brad Hicks

Update: Tenn. attorney general delays sale of Unicoi Co. hospital

Unicoi County Memorial Hospital (Press file photo)


ERWIN — Approval of Mountain States Health Alliance’s pending acquisition of Unicoi County Memorial Hospital is on hold, as the state attorney general’s office has a trio of concerns regarding the proposed sale, according to UCMH officials. 


On Tuesday afternoon, UCMH Board of Control’s issued a release stating the board had received word earlier in the day that the attorney general’s office had several concerns that would delay the office’s approval of the sale.


According to the release, “the AG’s office wants the transaction to be approved by both the city and county, they want the board to hold additional public meetings to thoroughly discuss our reasons for choosing the MSHA proposal, and they want assurance that the proposed total of $1.5 million in funds to be contributed to the city and county by MSHA will be used for health care purposes only.”


A letter from the attorney general’s office dated Tuesday and addressed to attorneys representing UCMH’s board said the office had concluded its preliminary review of documents provided by UCMH as part of the proposed sale process. The letter further states the attorney general’s office identified “several concerns” that would prevent the office from issuing a letter of no action regarding the proposed sale, which would have led to the closing of the transaction. 


The letter states these concerns include the board’s failure to comply with the provisions of the state’s Open Meetings Act in the selection and acceptance of the MSHA’s acquisition proposal. The letter also states that, according to the UCMH charter, the town of Erwin and Unicoi County maintain authority to approve UCMH “end of corporate life decisions” such as the sale of UCMH assets.


“None of the documents submitted indicates that the Town or the County has approved the proposed transaction or that such approval would be sought,” the attorney general’s letter states. 


In its proposal to acquire UCMH, MSHA committed to providing voluntary contributions of $750,000 each to the town of Erwin and Unicoi County at the time of the transaction’s closing, as well as a $1 million contribution to a foundation to enhance health care services within the county. In its letter, the attorney general’s office stated these payments to the municipalities and to “an unnamed foundation” do not appear to be for health or health related purposes as required under the state’s Public Benefit Hospital Sales and Conveyance Act of 2006.


MSHA President/CEO Dennis Vonderfecht issued a statement Tuesday afternoon in response to the delay. 


“We believe that the hospital board followed the proper procedures in evaluating which proposal was in the best interest of residents of Unicoi County, and we are disappointed that the state attorney general does not feel the same way about the process,” Vonderfecht said. “MSHA remains committed to meeting the needs of Unicoi County residents, however, and we are eager to work with the UCMH Board of Control to address all of the outstanding issues.”


In May 2012, the Erwin Board of Mayor and Aldermen approved having the town loan financially-struggling UCMH $800,000 for operational expenses. A stipulation of this move was that the hospital board hire a consulting firm to assess overall operations. Spectrum Health Partners was hired by the board in July and, after its assessment, recommended the community hospital look to partner with a larger health care organization. 


In late July, the UCMH board solicited requests for proposals from both MSHA and Wellmont Health System to get an idea of what each would provide in acquiring UCMH. Both organizations submitted acquisition proposal. The hospital board’s Executive Committee subsequently met in a closed strategic planning session and opted to move forward with MSHA’s proposal. 


On Oct. 4, the hospital board held a public meeting to formally accept the MSHA proposal. When the meeting was opened for public comment, the board held off on accepting the MSHA proposal and allowed other entities interested in acquiring UCMH to submit proposals. Both MSHA and Wellmont submitted revised proposals, and the UCMH board voted to accept MSHA’s proposal at a Nov. 28 meeting.


On March 28, the UCMH board voted to approve MSHA’s final definitive agreement. Along with providing funds, MSHA committed to assuming UCMH’s debt and liabilities and constructing a new acute care facility within Erwin. MSHA officials are looking at property off the Jackson Love Exit of Interstate 26 to locate the new facility. 


Under state law, the state attorney general’s office must review the acquisition process. 


UCMH Board of Control Chairman Roland Bailey said he is hoping for a quick resolution, as the $2 million line of credit extended to UCMH by MSHA when the board accepted the health care system’s acquisition proposal has nearly been exhausted. Like Vonderfecht, Bailey said the delay will prevent MSHA from providing UCMH resources that would only become available after the transaction’s closing. 


“We have just about burned through the $2 million that was in the proposal, and every day that we continue without getting approval for (MSHA) to take over, it prevents them also from being able to come in and to bring in physicians to do efficient operation of the hospital and to do the things any new owner would like to do when they come in,” Bailey said. 


Bailey said the hospital board would begin working with the attorney general’s office immediately. 


“We’ve got to sit down and regroup and find out just exactly where we stand, what the situation is, and what it is that we’ve got to do,” Bailey said.  “We’re going to do the things that are required to get the deal consummated. It’s the best offer by far, and so you’ve got to get the thing finalized.”


The UCMH board was set to meet in a called session on Thursday at 5 p.m., which is to be followed by the board’s regular meeting at 5:20 p.m. At the called meeting, the board was to consider the sale of Unicoi County Medical Services assets to MSHA. 


UCMH Interim CEO Jete Edmission said Tuesday evening the board’s regular meeting will still be held, but he said he would need to verify that the called meeting will still be held as planned. 

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Earlier Report:

Approval of the Mountain State's Health Alliance's pending acquisition of Unicoi County Memorial Hospital has been delayed due to concerns the state attorney general's office regarding the sale, according to a release issued Tuesday afternoon by UCMH Board of Control Chairman Roland Bailey.

"The Unicoi County Memorial Hospital Board of Control received word today from the Tennessee Attorney General that there are three concerns that will delay approval of the sale of UCMH to Mountain States Health Alliance," the release states. "The AG's office wants the transaction to be approved by both the city and county, they want the board to hold additional public meetings to thoroughly discuss our reasons for choosing the MSHA proposal, and they want assurance tht the proposed total of $1.5 million in funds to be contributed to the city and county by MSHA will be used for health care purposes only."

Bailey also states in the release that the board "stands by its earlier decision that the proposal from MSHA best meets the needs of all county residents, and it is the only one that fulfills the requirements set forth by the board in its initial RFP."

On March 28, the UCMH Board of Control approved a definitive agreement from MSHA to allow the healthcare system to move forward in its acquisition of the community hospital. In November, the board approved MSHA's proposal to acquire UCMH over a proposal submitted by Wellmont Health System.

Bailey also stated that the board of control would begin working with the attorney general's office immediately, and that the line of credit MSHA previously extended to UCMH is nearly exhausted. 

"We hope that the AG will allow us to move quickly to rectify any remaining concerns from the AG in order to keep our community hospital from closing," the release states.

Keep visiting JohnsonCityPress.com for details on this developing story, including reactions from MSHA officials.


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