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Update: Wellmont announces concerns over legality of UCMH process

July 16th, 2013 9:40 am by Brad Hicks

Update: Wellmont announces concerns over legality of UCMH process

Unicoi County Memorial Hospital has been the subject of a tug of war between the region's two large health care systems. (Press file photo)



ERWIN — Wellmont Health System has fired the latest salvo in the nearly yearlong battle between the health care organization and rival Mountain States Health Alliance to acquire financially-struggling Unicoi County Memorial Hospital.


Wellmont announced Tuesday that it has concerns over the legality of the UCMH sale process and has called for the UCMH Board of Control to begin the process anew.


On Tuesday morning, Wellmont released a statement declaring both its proposal to acquire UCMH and the proposal submitted by MSHA to be “null and void.” In the statement, Wellmont officials said this comes as a result of “internal legal analysis,” and that based on concerns previously raised by the state attorney general’s office, the organization feels the hospital board’s process used to choose a proposal did not meet legal requirements


Due to its stance, Wellmont will not participate in a public meeting to be held Thursday, at which the UCMH board will again consider the proposals from Wellmont and MSHA. 


“According to our legal advice, the proper remedy for these violations is for the board to issue another request for proposals and follow a legal, broad and transparent process from this point forward,” Wellmont President/CEO Denny DeNarvaez stated in the release. “Merely re-evaluating the two proposals in an open meeting such as the one scheduled later this week in not sufficient.”


On June 25, the UCMH board announced the sale of UCMH to MSHA had been delayed due to concerns the state attorney general’s office had over the pending transaction. According to a letter from the attorney general’s office sent to attorneys representing the board, the office’s concerns included the board’s failure to comply with provisions of the state’s Open Meetings Act in its original selection of the MSHA proposal, its failure to obtain the approvals of the town of Erwin and Unicoi County on the sale per the UCMH charter, and concerns over how monetary contributions outlined in MSHA’s proposal would be spent. 


“We simply want what’s in the best interests of the people of Unicoi County,” DeNarvaez stated. “And an open, honest process is clearly in their best interests.


“We continue to be humbled and appreciative of the tremendous support we’ve received from the residents of that community, and we will continue to work to ensure the process used to determine the sale of their hospital is transparent and fair.”


Spokesman Jim Wozniak said Tuesday Wellmont officials were unavailable to offer comment in addition to their statement. 


On Tuesday afternoon, MSHA President/CEO Dennis Vonderfecht issued a statement responding to Wellmont. In it, Vonderfecht referred to Wellmont’s announcement as a “ploy” to delay the sale process, and he stated his organization remains interested in acquiring UCMH.


“Based on the feedback from the Tennessee Attorney General and our own attorney’s legal analysis, we believe the UCMH Board of Control is following the appropriate legal procedures to assess the acquisition proposals in an open, public manner,” Vonderfecht stated. “Nothing in the letter from the Attorney General suggests that the process followed by the UCMH Board of Control in soliciting proposals was flawed. The recent announcement by Wellmont is simply a ploy to disrupt a process in which it had the same opportunity to participate as MSHA. In light of the dire financial situation at UCMH, the attempts by Wellmont to delay the process reveal its disregard for the fate of UCMH.


“As we have been for many years, MSHA remains committed to serving the people of Unicoi County and to supporting the county’s hometown hospital. Our offer to the people of Unicoi County still stands.”


Wellmont’s announcement came one day after MSHA announced it would extend an additional $1 million to the $2 million line of credit in its original acquisition proposal. According to a release issued Monday by MSHA, this additional funding can be utilized by UCMH for operational expenses once the original $2 million line of credit is extinguished. 


Board Chairman Roland Bailey said his board was going to do “everything possible” to address and satisfy the attorney general’s concerns. Despite Wellmont’s statement, Bailey also said the board will proceed with Thursday’s meeting as planned and would continue to follow the advisement of its legal counsel. 


“That may be their attorney’s stance, but their attorney doesn’t really have the final decision,” Bailey said. “That decision is made by the attorney general. The attorney general did not say that we were totally and completely out of compliance. What he said is he has some concerns and, so, we feel that the bids that we got were valid and that they are viable, and we are going to proceed with that process as of now.


“As far as (Wellmont’s) participation, that is their choice. They’ve been vocal in the past and if they decide to participate, then they’re welcome and invited. That’s as much as we can do. We’re going to proceed with our meeting on Thursday night because we’ve got to get this thing resolved. We cannot continue to operate a hospital when we’re broke and do not have sufficient funds.” 


Bailey said the board will not be considering new proposals Thursday, but will be considering the revised proposals submitted in October. In its proposal, MSHA committed to assumption of UCMH’s debt and liabilities, the construction of a new acute care facility within the limits of Erwin, the extension of a $2 million line of credit, and contributions of $750,000 each to the town of Erwin and Unicoi County, and a $1 million contribution to go to a foundation to enhance community health care services. 


In its proposal, Wellmont stated that it would assume UCMH’s debt, issue an uncapped line of credit for operational expenses, expand services at the hospital, provide contributions of $600,000 each to Unicoi County and Erwin, and would construct a replacement hospital within the county’s limits within three years of the transaction’s closing. 


Since late last year, MSHA has been working with UCMH under a management agreement. Although he said MSHA has had a strong working relationship with UCMH for a number of years, UCMH Emergency Room Director Ken Trzil said he has been even more impressed with MSHA since the organization began working with UCMH under this management agreement. 


“I’ve been even more strongly convinced that it was the right decision to go with Mountain States,” he said. 


Trzil said MSHA staff has been helpful, professional and is “genuinely interested in helping patient care be the best it can be.” He said MSHA’s presence has allowed UCMH to offer the same services locally that are available in Kingsport, Johnson City and Knoxville. 


“We wouldn’t have that if we had to go 45 minutes to an hour away for specialty care,” he said. 


Unicoi County resident and Wellmont supporter Bill Gaines said he met with Wellmont officials on Monday and was not surprised by the organization’s Tuesday announcement. He also said the statement does not mean that Wellmont is no longer interested in acquiring UCMH.


“They feel like they’d be giving legitimacy to a corrupt process, and it has certainly been that from the get-go,” Gaines said. 


Like Wellmont, Gaines said he wants the sale process to be “fair, transparent and inclusive.” However, Gaines said he feels the UCMH Board of Control has failed to take an objective look at the proposals, adding that he does not feel Thursday’s meeting would satisfy the attorney general’s concerns. 


“I’ll be surprised if it doesn’t come back again,” he said. 


The meeting to again consider the proposals will begin at 5 p.m. in the auditorium of the Unicoi County High School.


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