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Hospital Taxes

Court hearing will consider $2 million in hospital taxes

By John Howell Sr.

Though the sale of Tri-Lakes Medical Center to Alliance Health Partnership LLC was approved by U.S. Bankruptcy Judge David Houston last week, legal documents are still flowing into the court as the August 31 closing date nears.

On Friday, Judge David Houston will hear Panola County’s claim of almost $2 million in ad valorem taxes it claims due the county and the City of Batesville. The senior lender has objected, citing state law exempting non-profit hospitals from paying ad valorem taxes.

The claim of local government is based on the sales contract signed when Dr. Robert Corkern, through the non-profit corporation Physicians and Surgeons Hospital Group, bought the hospital in 2005 and agreed to pay the taxes as a condition of the sale.

Judge Houston, citing Tri-Lakes’ precarious cash position, approved a “free and clear” sale to Alliance Health Partners as the sole qualified bidder and establishing an escrow account “with amounts necessary to redeem the unpaid ad valorem taxes that might constitute a lien against the hospital property.”

DeSoto County attorney Al Welshans, formerly of Batesville, and Memphis attorney David Blaylock represent the city and county and will appear at the hearing at 1:30 p.m. today.

In separate complaints filed in bankruptcy court Monday, Physicians and Surgeons Hospital Group has sued Corkern and David Vance to recover amounts it alleges were paid before and after the hospital filed for bankruptcy in August, 2007. Physicians and Surgeons Hospital Group alleges that it received “less than a reasonably equivalent value in exchange for” a total of $3.1 million it paid to Batesville Hospital Management, Inc., Healthcare Engineers, LLC, and Emergent Health, Inc., for-profit entities owned by Corkern.

A complaint represents one side of a legal argument.

The complaint against Vance seeks recovery of $616,350 that Physicians and Surgeons Hospital Group alleges it paid Vance’s MTV Healthcare for which the hospital also received “less than a reasonably equivalent value.”

“UPS (Capital) and SNB (Stillwater National Bank) are doing everything they can to see that we close (the hospital sale) by August 31,” said Tri-Lakes Chief Restructuring Officer Michael Morgan Thursday.

“It looks like (the hospital) will emerge and be able to grow,” Morgan added.

The Tri-Lakes Medical Center is composed of its new facility, the east campus, opened in 2003 as an acute care hospital and the west campus, opened in 1977. The latter has served as a behavioral health facility since construction of the new campus. The facility was formerly owned by Panola County and the City of Batesville until voters approved its sale in a 2004 referendum.

It was sold in late 2005 to the Physicians and Surgeons Hospital Group which filed for bankruptcy under Chapter 11 in August, 2007.