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Hospital Update

Hospital goes on auction block in Aberdeen Monday

By John Howell Sr.

Batesville’s Tri-Lakes Medical Center will be sold Monday in an asset sale under section 363 of the Bankruptcy Code at the Cochran U.S. Bankruptcy Courthouse in Aberdeen.

“The good news is it looks like we’re going to get out of bankruptcy and move forward,” said Mike Morgan whose firm, Healthcare Management Partners, was appointed by the court to manage the hospital during its bankruptcy.

Judge David Houston set the sale time, date and conditions in a lengthy order filed August 5. The auction comes almost two years after Tri-Lakes filed for protection under chapter 11 of the Bankruptcy Code on August 22, 2007.

Auction for the sale of assets begins at 9 a.m., a hearing on a sale motion at 11:30 a.m. with a deadline for any objections to the sale motion set for 4 p.m., the judge’s order states.

Bids for the facility must be submitted by today.

Under section 363 procedures, Alliance Health Partners was selected in April as the “stalking horse” bidder whose due diligence into the hospital’s finances and operations is made available to other prospective bidders.

Alliance Health Partners includes “10 syndicate physicians (who practice) here in town and work in the hospital,” Morgan told the Batesville mayor and aldermen at their July 21 meeting. Physicians include Drs. Thomas Crowson of Meridian and Mike Havens and Billy Haire of Batesville, among others.

The value of the Alliance bid is approximately $16 million, according to the judge’s order stating approval of the Alliance’s letter of intent and asset purchase agreement.

The judge’s order also acknowledge that the hospital’s board of directors — Dr. David Ball, Raymond Belk, George Randolph — did not support Alliance’s bid. “… the board deferred to the recommendation of Debtor’s counsel and Health(care) Management Partners, LLP that Alliance be designated as the Stalking Horse bidder,” Houston’s order states.

A bid is also expected from Doctors Hospital of North Central Mississippi, a non-profit organization formed in January with support of Dr. Ball. Robert Crites is registered agent. Attempts to contact Crites were unsuccessful.

Unresolved is the issue of the hospital’s $1.9 million ad valorem tax liability to the city and county that began in 2006. UPS Capital has filed objection to the tax claim, citing state law exempting non-profit hospitals.

Physicians and Surgeons Hospital Group, the non-profit organization created in 2005 by Dr. Robert Corkern and Ray Shoemaker to purchase the hospital from the city and county, agreed to pay ad valorem taxes as a condition of sale.

“Physicians and Surgeons — Craig Geno who represents them — has filed a motion to ask the judge to sell the hospital free and clear of all those tax liens …, then they would put the money in a bucket so to speak and probably divide it up,” Batesville Assistant City Attorney Colmon Mitchell told the city mayor and aldermen in a recess meeting Wednesday, August 12.

Mitchell told the city officials that there is no provision in the state’s constitution or statutes that would allow them to legally enter a compromise agreement about the taxes.

“So it’s all or nothing?” asked Ward 3 Alderman Stan Harrison.

“Yea,” the attorney replied.

Chief Restructuring Officer Morgan and Tri-Lakes Chief Administrative Officer Vince Brummett were accompanied by about 40 hospital employees to the July 21 mayor and aldermen meeting, where Morgan asked city officials not to object to UPS Capital’s objections to the ad valorem tax claims.

“I don’t think that we as a board can vote not to collect those taxes; we might be liable,” Mayor Jerry Autrey said.

Mitchell said that he had worked closely with Panola Board of Supervisors’ attorney Bill McKenzie on the tax question. Panola County has hired Al Welshans of the Memphis law firm Glankler Brown for representation in the August 27 hearing to determine the validity of the tax claims.

Another hospital-related matter nearing resolution is the July 13 agreement between Tri-Lakes and Medicaid about Medicaid overpayments. The two parties agreed that the hospital owed Medicaid $24 million, but Medicaid agreed to release the new owner from its repayment as long as “new ownership and management of Tri-Lakes that does not include any ownership or management control or people and corporate entities associated with the former Tri-Lakes administration.”

 Judge Houston approved the agreement, with minor modifications, including striking the names of people and corporate entities from the agreement, in an order filed August 11.