By John Howell Sr.

At least two groups now seek to gain control of the bankrupt Tri-Lakes Medical Center.

Dr. David A. Ball is the spokesman for a group of citizens seeking local control of the facility.

Another group — “Mississippi-based, not in Batesville,” according to Tri-Lakes Chief Restructuring Officer Michael Morgan — has assumed the role of a “stalking horse” to purchase the hospital’s assets.

The next step in the chapter 11 reorganization bankruptcy that began in August, 2007, will be a sale under bankruptcy Section 363 which allows the assets to be sold intact to the highest bidder.

In a message faxed October 20, Ball asked for support of a group seeking local ownership.

“This group consists of citizens from all walks of life and if successful in their efforts, ownership will be by a newly-formed not-for-profit corporation,” he states.

“The Board of Directors of the non-profit will be local citizens from Batesville and the Hospital’s Service Area,” Ball’s fax continued.

The faxed message encourages support of the effort by the signing of an accompanying “Statement of Support” to the United States Department of Agriculture.

The USDA is the guarantor of the $25 million loan made in 2005 by UPS Bank to the non-profit Physicians and Surgeons Hospital Group.

The loan funded purchase of the facility from the City of Batesville and Panola County.

Dr. Ball’s message and statement also support the creation of a “Citizen Advisory Board to work hand in hand with the Board of Directors of the Hospital …”

In a Section 363 sale, the “stalking horse” is a first bidder. His role is to negotiate with the debtor in possession an asset purchase agreement, the terms and amounts of which are known to other potential bidders. The stalking horse is protected for his time and investment in the bid by provisions that include a breakup fee between one and five percent of the sale price, expense reimbursement up to a negotiated cap, qualifications requirements for competing bidders, strict deadlines for competing bids and final court approval, among other requirements, according to Daniel M. Glosband of Goodwin Proctor LLP of Findlaw.com.

Identity of the stalking horse bidder for Tri-Lakes is protected by a confidentiality agreement, Morgan said. “Their attorney and the debtor’s attorney are working” on a bid, he added.

Presumably, the local group would be bidding against the stalking horse.

The Tri-Lakes Medical Center was opened in 2001 as a county-owned hospital replacing the old South Panola Community Hospital. Almost immediately it ran into financial problems.

The City of Batesville later became part owner when it loaned money from its economic development revolving fund to meet bond payments.

In 2004, voters of the South Panola Hospital District in a referendum overwhelmingly approved sale of the facility to the highest bidder.

The hospital was purchased in November, 2005 by the Physicians and Surgeons Hospital Group, a not-for-profit entity formed to allow financing of the purchase through the USDA guaranteed loan.

Physicians and Surgeons Hospital Group, Inc. was run by board of directors composed of non-paid volunteers including Dr. Ball, George Randolph, Raymond Belk and Dr. Robert Gray. The board hired a for-profit company owned by Dr. Robert Corkern to manage the hospital.

Days before the August, 2007 bankruptcy filing, Dr. Corkern cited drastic reductions in Medicaid reimbursement as having pushed the facility to bankruptcy court protection to allow reorganization.

Bankruptcy Judge David Houston ordered Physicians and Surgeons Hospital Group to select a management company to serve as hospital administrator during the reorganization.

In December, 2007, the hospital trustees hired Healthcare Management Partners (HMP) as the lowest of three bidders.

The judge appointed HMP’s Michael Morgan as Chief Restructuring Officer (CRO) and gave him authority to run the facility while it is in the bankruptcy court’s jurisdiction.