“We Had to Sell” – Ty Cobb Officials Outline Sale of Hospital at Public Hearing

We had no other choice but to sell.

That was the bottom line from Ty Cobb Healthcare officials Thursday afternoon at a public hearing required by the State on the sale of Ty Cobb Regional Medical Center to St. Mary’s Healthcare System.

The public hearing was one of the last steps in the sale process and was attended by local citizens, county and municipal leaders, as well doctors and other medical personnel.

During the hearing, those in attendance heard from Ty Cobb Hospital Authority Board members, TY Cobb CEO David Hearn, as well as the attorneys and consultants who helped broker the sale to St. Mary’s.

In giving an overview of the circumstances leading up to the decision to sell Ty Cobb Regional, Hearn testified under oath that the hospital had been losing money to the tune of a million dollars a month since the doors opened in July 2012.

Hearn said one reason for that was the changing healthcare climate in the U.S.

“From the time this project was conceived, until the time it opened, the environment of healthcare changed drastically,” Hearn said. “You had new federal laws that came out; you had an economy that deteriorated suddenly and didn’t recover as quickly as people thought it would.”

Hearn said other problems included out-migration of services. In other words, patients in the area continued to seek healthcare from sources outside the area such as in Athens or Gainesville instead of coming to the new hospital.

“The complexity 0f revenue cycles for rural hospitals had taken the market to such a place that for a rural hospital to stand alone, it would need about $50-million a year and this hospital only has revenue of about $25-million,” Hearn said.

Hearn said another problem was it took about six months after the hospital opened to get its Medicare and Medicaid reimbursements coming in.

It wasn’t long before Ty Cobb Healthcare System, Hearn said, began supplementing the hospital’s revenue out of its own reserves.

“The (Ty Cobb Healthcare) System over time has put in another $9.4 million voluntarily out of its assets,” Hearn said. “First we were putting money in to help the hospital get to a profitable position. Once we realized that wasn’t likely, we realized that what we were doing was buying time and extending the runway so we could locate a partner or a buyer. Unfortunately, the System has run out of the ability to extend that runway. So, it became critical, but fortunately St. Mary’s has entered into this transaction.”

Hearn said the decision was made by the board to hire an outside consultant after bond holders became concerned about the hospital’s lack of profitability.

Even with selling off of the Healthcare system’s three nursing homes and assisted living facilities, there wasn’t enough money to keep Ty Cobb Regional going.

The Hospital board hired the firm of Hammond, Hanlon, Camp LLC or “H2C” who conducted a financial feasibility study and determined Ty Cobb Regional could not continue on its own.

Principal Richard Baymen testified Thursday that out of the multiple 100-page brochures they sent out to hospital systems around the country, only St. Mary’s responded with an offer.

Hospital Board chair Fort Oglesby said if for some reason St. Mary’s backs out of the deal, Ty Cobb Regional’s doors will close.

“If this deal doesn’t go through and we can’t come up with the money, basically we lose 300 jobs in Franklin County.  Those jobs will be terminated immediately. We cut the utilities off, lock the doors, hand the keys to our bond holders, and we have a beautiful vacant building,” Oglesby said.

Also in attendance was a representative from the State Attorney General’s office who will take the information gathered Thursday night back to Atlanta, along with the results of a study by a financial consultant for the Attorney General’s office from the CPA firm of Ernst & Young.

That CPA, Bridget Bourgeois, ASA, Partner, Ernst & Young, LLP testified her study found that Baymen and H2C had followed all standard practice guidelines and that their conclusion that the hospital must be sold or close its doors was correct.

St. Mary’s is getting Ty Cobb Regional basically for a song.

St. Mary’s will pay $12.95-million for Ty Cobb Regional – less than half of what it cost to build and much less than the $39 million in bonds still owed.

At the public hearing last night,  Hearn went over the terms of the sale.

“They’re paying a cash payment of $12.95-million,” Hearn said. “Under our structure, the building and the land is owned by one entity. The hospital operations and the certificate of need are owned by Ty Cobb Regional Medical Center LLC. Under this transaction, the combined assets of this facility, the land, the building, and operations, and the certificate of need will be sold to St. Mary’s Healthcare System. They will own the land fee simple. Under that transaction, the debt that is owed will be cancelled and St. Mary’s will own the hospital free and clear of all liens and debt.”

Hearn said that means Ty Cobb Healthcare walks away with nothing, but he said the continued medical services that will be provided to the community are most important.

“The debt on the property far exceeds the proceeds. So, the proceeds will go to extinguish a portion of the debt and the remainder of the debt will be cancelled,” Hearn explained. “And then Ty Cobb Healthcare System will walk away from its $26.9 million investment in the hospital with the knowledge that we were successful in bringing a first-class facility to the community. And although we tried very hard to make this hospital successful, we could not. But we still will be pleased to offer this to the community so the hospital can continue to serve this community. Even though we’re not getting any proceeds and we’re walking away from a very large investment, we feel like that’s very much in keeping with our mission.“

The Agreement also requires St. Mary’s to continue to operate the hospital as an acute care hospital and provide community and charity services.

If the State Attorney General approves the sale, St. Mary’s could close on the deal as early as June 1st.

Don McKenna is the President and CEO of St. Mary’s Healthcare System in Athens.

McKenna said they have already outlined a strategic plan for Ty Cobb Regional, which includes keeping the heritage of Ty Cobb Healthcare and their commitment to providing quality healthcare to Northeast Georgians.

“Ty Cobb has a long history in this community and St. Mary’s also having a long history in Athens, we will try to continue on with what has already been established,” he said. “It’s our intent to keep people in this community. We have been successful in the critical care census at our hospital in Greensboro. We have been very successful in stopping the out-migration from that local community to Athens or Greenville.”

As for specific programs, McKenna said some of the areas of medical service they plan to focus on include stroke, diabetes care and prevention, wound care, and ER services.

McKenna said they will also continue to provide charity care for indigent patients.

When it comes to the existing personnel at Ty Cobb Regional Medical Center, McKenna made no guarantees. He said all of the current Ty Cobb Regional employees at the hospital will have to apply for jobs at the hospital once the sale is complete.

“We are in the process of promoting the online application process,” he said. “So far, we’ve had over 200 of the (Ty Cobb Regional) employees apply for an opportunity to stay working here. They’re going to go through the same rigorous hiring process that even I went through, including drug testing and background checks, and in-house interviews. Clearly folks who pass our standards will become our employees.”

He said some now at Ty Cobb Regional may also move to other areas of St. Mary’s Healthcare and some might not be re-hired.

On Sunday, 92.1’s Community Forum will air comments from St. Mary’s Healthcare President and CEO Don McKenna on what St. Mary’s is planning for the future of Ty Cobb Regional.

Community Forum can be heard Sunday at 12:03 after AP news at noon.