By John Howell Sr.

The Tri-Lakes Medical Center could come out of bankruptcy as early as September or October, Chief Restructuring Officer (CRO) Michael Morgan said last week. It could emerge through a for-profit corporation, “a syndicate with 15 to 20 physicians who have a voice in how this place operates,” Morgan said, speaking at the June 3 meeting of the Batesville Rotary Club.

Or — though the University of Mississippi Medical Center is not presently interested because of the state’s Medicaid crisis — “once that issue gets fixed, the University may have an interest in the hospital,” Morgan said.

Not interested is the Baptist Memorial Heathcare Corporation which owns and operates 15 hospitals including Oxford. “Baptist feels like they were burned the first time the hospital was sold; … they’re not interested,” Morgan said. Nor has the Methodist Health System shown interest, he added.

Morgan is a principal in Healthcare Management Partners (HMP), a firm that specializes in turning bankrupt hospitals around. After Tri-Lakes filed chapter 11 bankruptcy last August, U. S. Bankruptcy Judge David Houston ordered the hospital’s trustees to hire such a firm to take over as the hospital’s administrator. HMP’s bid was the lowest of three submitted.

When Morgan took over as CRO last December, the hospital was “two or three days away from not making payroll,” Morgan said Tuesday. The first priority was to placate the Debtor in Possession (DIP) — the lender providing the bankrupt facility’s operating money — General Electric Capital Corporation.

The DIP was placated for another 60 days, then another. Last month, the DIP loan was extended for six months, an indicator that from GECC’s perspective, the hospital is headed in the right direction.

Driving the hospital in that direction has not always won Morgan friends. The CRO has slashed jobs and contracts at Tri-Lakes, cutting the number employed there from 500 to 281, eliminating contracts that he said will result in cost reductions of $5 million annually.

Nor have the CRO and the hospital’s board of directors seen eye-to-eye.

Directors in place

Dr. David Ball, Raymond Belk and George Randolph are the directors of Physicians and Surgeons Hospital Group, the 501 3c non-profit corporation formed in 2005 to purchase Tri-Lakes from the city and county.

“The community needs to realize that the board was never removed,” Ball said Friday.

Judge Houston reiterated the board’s role in a May 23 final order delineating the relationship and responsibility to the court of the board, the CRO and the debtor’s law firm, Harris, Jernigan and Geno, PLLC.

“The Board shall remain in place; … the board may petition the Court to review the actions or inactions of the CRO as to which the Board disagrees, and which the Board believes may affect the reorganization of the Debtor,” the judge stated in the May 23 order.

“We’ve been fighting like the dickens for this place,” Ball said Friday.

Judge Houston also removed an earlier requirement by UPS Bank that the directors sign a “loyalty oath” to which they had objected, both for its ambiguity and its apparent conflict with state law governing non-profits.

From January through April Tri-Lakes produced a positive cash flow, Morgan said June 3. May figures were not yet available, and June was projected to be “lean,” Morgan said.

“Medicaid runs out in June; what we are experiencing just in the last couple of days is that the Medicaid recipients have run out of days,” the CRO continued.

Lenders interested

Nonetheless, lenders are “interested in taking over the debt” of the hospital’s USDA-guaranteed loan from UPS bank and from an Oklahoma bank, Morgan said.

Both campuses have been operating “with fair volume,” averaging 52 patients a day, Morgan said. At that census the facility does “a little better than break even.”

In his remarks and in response to questions, Morgan also

•Tri-Lakes is well suited for expansion of its obstetrics, orthopedic and cardiac care with its existing physical plant.

“Our OB program is back in shape and better than it was before,” Morgan said.                   

•Ownership by a physicians’ syndicate provides a “broad base of support and opens doors for new specialties,” the CRO said. Private clinics established to house the specialties should not be owned by the hospital, he added.

• The contract of HMP can be terminated at any time, Morgan said.

•Twenty-three percent of the hospital’s admissions come through its emergency room, Morgan said. Dr. Scott Sanford of Oxford was named emergency room director in April. “Sanford brought five E. R. doctors from Oxford; … our volume has actually picked up as a result of having those doctors in,” Morgan continued.

•At the beginning of the month, employee insurance coverage was converted from the former self-insurance program to a Blue Cross/Blue Shield policy. “That was the first thing when we came here; their (hospital employees) biggest concern was what we were going to do with the pre-petition insurer,” Morgan said. “They were going to come back against the employees” (for medical expenses the employees thought covered by their insurance.)

•Morgan said in a June 5 interview that on June 2 he had asked hospital department managers for cutback suggestions to contribute to the cash flow during the Medicaid crisis month. He said the move “didn’t point out anybody specific” and wouldn’t be a cutback in the patient care area.”

Non-medical personnel said that they had been asked to voluntarily cut back one day a week. Morgan said that reductions had “nothing to do with anything but June.”

“I think we’re well on our way to coming out of bankruptcy,” Morgan said. “There’s no reason why this hospital can’t be the stabilizing institution of the community.”