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Wednesday, May 4, 2016

Hospital Board pursues deal to obtain $1.7 million cash infusion

Thursday, October 13, 2011

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After approving an offer to sell its home health care license to the LHC Group, the Fulton County Hospital Board of Governors is scrambling to get approval from the USDA to make the sale.

At a special meeting on Oct. 3, board member Danny Perryman passed out a four-page letter from Pete November, an LHC vice president, regarding the "Proposed Acquisition of Home Health Services Assets."

Board member Jerry Blevins immediately made a motion "to accept the million-seven offer."

The motion was unanimously approved by a board anxious to receive a $1.7 million payment, to help the cash-strapped hospital deal with more than $1 million in debt.

The cash will not appear overnight, however.

While the hospital board has approved the sale of its home health care license, the LHC Group Board of Directors still must approve the purchase.

According to the LHC Group Letter of Intent, if all conditions are met, "the anticipated closing shall take place Dec. 1, 2011."

The letter states the offer to buy the license is not binding, and a formal agreement must be written before the transaction will be finalized.

Conditions set by LHC require the board to demonstrate the home health care license is in good standing with state and federal health agencies, is transferable to Arkansas HomeCare and that the license is free of any liens or debts.

Before the hospital can sell the home health license, it must submit financial information to the USDA, the federal agency which is owed for a construction loan used to improve the hospital several years ago.

The LHC Group, a large Louisiana-based company, currently leases the license from the hospital for $5,000 a month to operate North Arkansas HomeCare in Salem.

One USDA requirement is that the hospital board submit a letter explaining how it will meet its loan payments without the $5,000 a month lease payment.

During the meeting, County Judge Charles Willett said, "They consider that ($5,000 a month) anticipated revenue but, since we are paying off and getting all our vendors down to zero, that should not be a concern."

Based on the August financial report, the hospital owes vendors $552,000.

By paying off those outstanding debts, Judge Willett believes the hospital will have an easier time meeting loan payments and paying future debts.

The North Arkansas Electric Co-op is still owed about $200,000 for a construction loan it made to the hospital. There had been some concern NAEC had placed a lien against the hospital, which could jeopardize the home health license sale. According to Judge Willett, the hospital is current on its NAEC payments, and CEO Mel Coleman had indicated his company is not seeking immediate payment of the debt and will not file a lien as long as the payment schedule is met.

Another reason the hospital board wants the license sale completed as soon as possible is the $250,000 the hospital owes on its line of credit with the Bank of Salem.

Board Chairman Bill Pace indicated the line of credit matured on Oct. 2, and the Bank of Salem wants a letter from the board stating its intentions to repay the line of credit through proceeds from the home health license sale or through Medicare reimbursement funds the hospital receives.

"They said if payment is expected within the next 30 to 60 days, they will make a renewal based on that letter," Pace said. "If no payment is received, they are going to set up an aggressive repayment on any outstanding balance on the lifeline of credit."

The board authorized sending a letter of intent to the bank, promising repayment through funds received from the home health license sale.

In May, the hospital board approved a budget for the new fiscal year which, according to former CEO Joe Hammond, would show a $766,000 loss.

The board is working on a new budget that will apparently reflect vendors and the line of credit being paid off, using $800,000 in revenue from the home health license sale.

In addition, the new budget will show a dramatic reduction in employee salaries and benefits. At the end of the Oct. 3 meeting, the board approved implementing "cost-cutting measures," which had been recommended by department heads. At the request of the board, department heads proposed staff reductions that would reduce payroll by $369,000 if fully implemented.

Judge Willett indicated approving a new budget with dramatically reduced debt is important to receiving USDA approval of the home health license sale.

"Mr. Pace, we need to get together and start working on the budget. This is very important. We need to have this done in several days," Willett said.

Staff members indicated they could put the new budget together internally.

A special meeting of the hospital board will be needed to approve the new budget, so requested financial information can be submitted to the USDA as quickly as possible.

During the meeting, board member Perryman indicated he had asked Quorum Health Resources (QHR), a private hospital management company, if it could help the hospital find candidates to serve as chief financial officer or administrator.

Because QHR was still working on the request, the issue of hiring the company to assist in the search for a manager was tabled.

Leslie Batterton, the hospital's chief of nursing, continues to serve as interim administrator.



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