Hospital authority to declare bankruptcy - The Randolph Leader: News

  • Roanoke, Randolph County, Alabama — February 6, 2016
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Hospital authority to declare bankruptcy

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Posted: Thursday, March 31, 2011 9:36 am

The events at Randolph Medical Center have been a roller coaster ride the past few weeks, and Tuesday night's called meeting of the board was nothing short of startling.

On the advice of Attorney Lee R. Benton, Roanoke Health Care Authority voted to declare Chapter 11 bankruptcy and selected him to handle it. The authority also voted to accept proposals next Wednesday on the sale of Southern Family Health Care and accepted authority chairman Gary Clark's resignation. When chief financial officer Michael Parsons left the building after the meeting, it was most likely for the last time.

When most of the business was concluded Clark said things had reached the place where he felt there was not anything more he could do. He had some business and family business to take care of and tendered his resignation.

He said he wished the hospital could stay open and he was sorry he failed at keeping it open. He said this whole thing has been wearing on him personally and emotionally.

Vice-chairman Trae Wilkinson was approved to take over as acting chairman and sign all documents. He said that by next Thursday's called meeting a different chairman should be named because he works out of town and cannot continue to serve as chairman. Clark suggested they find someone local who can devote the time to this because it can be quite time consuming.

Several entities had expressed interest in the clinic, which is profitable.

Benton, of Benton & Centeno LLP in Birmingham, said he had been brought on board by the authority several weeks ago to see if the hospital could be salvaged. They had high hopes that did not pan out and the hospital closed. There are numerous assets, and the health care clinic on Price Street remains open.

Benton said they talked about bankruptcy and the various options, including a receivership in state court, but that lacks specifics on how to liquidate and who gets paid in what order. Another discussion involved what happens when a business goes out of business and creditors fend for themselves, filing liens and lawsuits trying to recover their losses. This is confused and disorganized, an option Benton does not recommend. The other two options involve bankruptcies.

Using Winn-Dixie as an example of a store filing Chapter 11, he said they reorganized and closed 200 unprofitable stores out of more than 900 and are now profitable. But the kind of Chapter 11 the authority would be looking at is liquidation of assets.

Benton recommended the Chapter 11 avenue saying they could pay secured creditors such as Correct Care, the company that provided physicians to the hospital and is owed in the neighborhood of $350,000. Correct Care made a demand as late at that afternoon for payment.

He said rural hospitals are stressed all over the country, mentioning he was involved in the Carraway closing and other bankruptcies.

The board has been trying to find someone to buy, lease or operate the health clinic, which everybody thinks is important. It is not a separate entity so someone could file a claim against it. The authority needs to sell it quickly to keep it operating. Of course the sale would have to approved by bankruptcy court.

Under bankruptcy the government would be paid first (a reference to the United States Department of Agriculture loan and back Medicare payments) then employees' salaries and benefits, then secured creditors. They may have to give some collateral such as the CT scan back to the company.

The authority is a separate entity and is not backed by the city of Roanoke with the exception of the $300,000 line of credit, which should be paid by the city. The bond issue cannot be undone whether the facility operates or not, he said. The hospital's portion of ad valorem tax will continue to come to the hospital until the USDA loan is paid off.

He recommended an emergency filing of the bankruptcy petition in U.S  Federal Court in Montgomery and almost simultaneously file for a trustee who can take on liquidation of assets.

The board members voted unanimously in favor of filing the petition, which Benton said could be filed in 48 or so hours.

Benton said he had  not anticipated filing the bankruptcy because he was opposed to it. He thought and still believes the value of the business will be affected by the filing, he said. The code would not let him file Chapter 7 so Chapter 11 was the next step.

Authority member Walter Sudduth said of the filing: "It's bad--about as bad as it gets. We have to go day by day." Like Clark, he said his goal was keeping the hospital open.

On another issue, Clark brought up the historical items in the display cases that Wyner Phillips of the Randolph County Historical Museum had requested for the museum to hold for display and safekeeping. He said some families who donated items want them back, but they can get them from the museum.

They also agreed with a request from an employee that the painting of Dr. Chester Primm go to the museum, where his family could pick it up.

Mayor Mike Fisher, who serves on the authority, said they are still pursuing options and if the hospital reopens he would like the displays returned. Authority Secretary Pat Truitt said in the request to the board it was stated if the hospital reopens at any time the items will be returned. The board approved the measure.

Clark wanted it clarified that the resolution passed at the last meeting authorized the chairman to sign all documents relating to the hospital's closing. It is all encompassing, he said, not just dealing with the USDA loan.

Human Resources director Joe Davis updated them on what he is doing to place employees and deal with other matters. Of the 127 employees, 25 of whom were part-time, 23 have been hired elsewhere. He has been making calls and spreading the word about the employees. Lanier Memorial Hospital has been helpful in taking employees. His goal is all the full-time employees who want to work will be placed. West Georgia did a great job with their job fair, he said.

Northeast Alabama Regional Medical Center will be in the cafeteria next Monday, April 4, for a job fair like West Georgia was last week, he said. He reminded people they can apply on line. State employment office workers also will be there, and insurance personnel will be there to clarify any issues, including short and long-term care policies and life insurance. It will be much easier to get questions answered there than by phone, he said. The medical insurance ceases to exist Thursday, the last day of the month, and he urged them to make an effort to get insurance. Because there is no more RMC, Cobra insurance coverage is not available. Davis offered to meet at any time to help answer questions.

Clark noted they need a certificate showing employees have been covered with no gap in coverage. That will aid in getting new insurance.

Responding to a question from Mandy Stone, he said the retirement people would be there on Monday too. They are still working on this. Some people have already filed. The withdrawal from the state retirement system was effective March 24.

Administrator Jon Dixon was pressed on how much longer he would be there. He is employed by West Georgia Health and anticipates his last day being April 4. He said it is undetermined how much longer he would be there continuing to wind down the hospital.

CFO Parsons said April 20 will be his last day but later explained he will be working by phone and computer from home while he is seeking another job. He can be reached and if something major happens he can return to the hospital, he said.

The mayor requested before Parsons left to provide him with financial audits from 2005 to 2008, which Parsons said he would do. He said that when Gilliard Health Services, who once owned the hospital, left they took much of the paperwork with them, however.

After a lengthy executive season when Stone was called in and came out obviously angry, the nurse practitioners from the health clinic were called in and came out a little more cheerful.

One of them, April Anthony, had previously asked about malpractice insurance coverage being null and void after Monday but Clark said it would be taken care of.

The group had an in-depth discussion on property management after Clark asked who would care for the building, who would have keys to the building, and how would they prevent mold and mildew?

Dixon said he believed the building could be secured without changing the locks. The grass will still need to be mowed, the air-conditioning will need to be turned off and on. The authority does not have a real structure to manage these kinds of things so the properties do not sit and deteriorate. Clark said if it is 28 degrees the facilities need to be heated.

Ron Cameron said the computer room has to stay at a certain temperature, as do some other programs and rooms. If they kill all the air-conditioning mold and mildew will take over and the building will pretty much be gone. If the grass grows up the city will cite them for a nuisance. The mayor said the city would work with them but there are not enough employees to answer calls dealing with the hospital.

Wilkinson asked if they could find out a minimum use level bill from Alabama Power Company. Clark said he had talked to a representative there and without using much of the normal things operating in only 10 days the bill was $2,600. Cameron said fans would take care of the temperature now but as the heat rises there has got to be some air-conditioning.

Clark said all that has to be done by human beings--things like who picks up the mail, opens it and responds to it?

Benton said the debtor normally remains in possession of the property but in this case the trustee will have to retain someone to do these things, as well as security. The trustee is an attorney and would likely hire someone locally to do these things. He would be paid from the pool of money for unsecured creditors.

Benton said a construction lien has been filed, and his understanding is the building is unencumbered with no mortgage.

The mayor told the audience it is still not too late and everybody in the room should call Sen. Richard Shelby and Sen. Jeff Sessions about the hospital. Clark said Rep. Mike Rogers would also be a good person to call.

Charlotte Bishop of the rural health center, and its former owner, said, "We want to stay in the area to provide health care to the local area. There's a need there and we don't want to let our people down."

She and her people have been looking at other facilities, she said, because they want to continue providing these services. They handle 60 to 70 patents a day. Anthony said last month they saw more than 1,000 patients. Twelve to 14 people work there.

After she and the other clinic employees came out of the executive session Bishop said, "We feel more comfortable about the clinic staying open."

After coming out of executive session the motion was made and approved to seek negotiations to sell the clinic. They agreed to close proposals Wednesday, April 6, at noon. The motion included the right to reject any and all proposals. The proposals will be delivered to Dixon to be opened. They will be presented to the board the next day, Thursday, April 7, at a called meeting at 5:30 p.m. Any sale would be subject to approval by the bankruptcy court. The attorney said cases are already pending or threatened to be filed against the hospital but the bankruptcy filing will stop everything.

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