Tri-Lakes Medical Center

Published 12:00 am Friday, May 1, 2009

Court order ‘very positive’ for Tri-Lakes, CRO says

By John Howell Sr.

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U. S. Bankruptcy Judge David Houston on Wednesday approved Alliance Health Partners as the “stalking horse” bidder for purchase of bankrupt Tri-Lakes Medical Center.

“This is very positive,” Michael Morgan, chief restructuring officer (CRO) at Tri-Lakes. Morgan said on Thursday. “I’ve been meeting with employees and letting them know there’s a stalking horse and there’s a close of this on June 30,” he added.

June 30 should mark the end of the hospital chapter 11 bankruptcy, almost two years after the August, 2007 filing, Morgan said.

“UPS Capital was here today,” Morgan continued, meeting with Alliance representatives. “That meeting went extremely well.”

UPS Capital is the largest secured creditor in the bankruptcy. The bank provided the $27.3 million USDA-guaranteed loan that financed the purchase of the hospital from the city and county in November, 2005.

Alliance Health Partners includes Dr. Thomas Crowson, a Meridian gastroenterologist and Certified Public Accountant, and Drs. Mike Havens and William Haire of Batesville.

“That just puts us one step closer,” Haire said Thursday. “We hope to take over the hospital in early fall.”

Alliance has “30 days to prove we are qualified and present our qualifications to the USDA,” Havens said.

The approval of Alliance as stalking horse at the April 29 hearing came over a strident objection from George Randolph, Dr. David Ball and Raymond Belk, who are directors of Physicians and Surgeons Hospital Group, the non-profit corporation formed in 2005 to buy Tri-Lakes.

Dr. Robert Corkern served as administrator of the hospital through a management contract with his Batesville Hospital Management, Inc. He also signed a personal guarantee for the $27.3 million UPS loan. (Corkern is not the same person as Dr. Richard Corson, a retired gynecologist who lives at 106 Country Club Road in Batesville.)

The objection of the board of directors stated that Alliance was chosen even though one of the other three bidders for stalking horse designation in the Section 363 bankruptcy sale had submitted a higher bid. The bid preferred by the directors, designated as Bid No. 4, “included an interest to have Dr. David Ball serve as Tri-Lake’s Chief of Staff,” their objection stated.

The language of the objection also suggests ongoing tension between board members and Morgan. In November, 2007, the bankruptcy court placed Morgan in charge of the hospital, and stated in a February, 2008 order that neither the board nor Corkern “shall interfere in any way with the decisions of Mr. Morgan …”

In the directors’ April 29 objection, they acknowledge that, among other reasons, “the CRO would not recommend Bid No. 4 as the stalking horse because … there was a perceived connection between prior or current hospital management and the nonprofit corporation which would be Bidder No. 4.”

(While Dr. Ball is mentioned, the identity of bidders numbered one through four is not otherwise revealed in the objection.)

With Bidder No. 4, “Medicaid liability would be back on the table and jeopardize the whole deal,” Havens said.

Among unsecured creditors in the bankruptcy is Mississippi Medicaid, which has claimed that Tri-Lakes owed upwards of $23 million in Medicaid overpayments at the time of the August, 2007 bankruptcy.

“Medicaid has advised us that they will work with any qualified buyer not associated with the previous administration,” Morgan told The Panolian in a March 6 story.

“We could still be outbid,” Havens said. “It (Wednesday’s order) just locks us in as the stalking horse. A qualified bidder can walk in and outbid us and buy it,” he added.

“Panola County needs to look forward to coming together,” Havens continued. “We want a hospital that is fiscally responsible, that pays its bills and its employees and where you will feel good about sending your grandma for care.”