At least three for-profit chains and one not-for-profit system are competing for an unlikely prize-a bankrupt West Virginia hospital.
Logan (W.Va.) General Hospital is about $65 million in debt, said W. Bradley Sorrells, the lawyer representing the hospital in the bankruptcy case, pending in U.S. Bankruptcy Court in Charleston, W.Va.
Logan Medical Foundation, the not-for-profit organization that operates the hospital, began missing payments on $31.4 million in bonds in January 1998. Last October it filed for Chapter 11 bankruptcy protection. The company faces a June 18 deadline for submitting its reorganization plan before its creditors can step in with their own plans (May 10, p. 44).
Although the hospital's preference is to remain independent and pay off its bond debt by selling property and getting a $15 million loan, lawyers for the trustees of the hospital's bond issue would prefer to see the hospital sold, Sorrells said.
The hospital has been working furiously to sell various nonhealthcare properties, including a strip mall, and so far has raised just under $6 million from selling some residential and commercial real estate and some construction equipment.
Since the bankruptcy proceedings began, Logan General has received offers from Province Healthcare Co. and Community Health Systems, both based in Brentwood, Tenn., and from Naples, Fla.-based Health Management Associates.
Sorrells said the offers ranged from $76 million to $80 million.
Martin Rash, Province's president and chief executive officer, said his company's concern about the recent turmoil at Logan General was outweighed by an appreciation of the hospital's medical staff and the six-county area it serves.
"That hospital is desperately needed in that area," Rash said.
Province retracted its offer two months ago when it became clear that the hospital's first choice would be to remain independent. But Rash said the door is still open.
In addition, Genesis Healthcare, a not-for-profit system of three nearby West Virginia hospitals, has offered to let Logan General join its system. In return for a $1.3 million fee to join, Genesis would guarantee a loan to pay off the hospital's $65 million debt.
Genesis owns 440-bed St. Mary's Hospital in Huntington, W.Va.; 293-bed Cabell Huntington Hospital, also in Huntington; and 201-bed Pleasant Valley Hospital, Point Pleasant, W.Va. They share a common bottom line, and each has equal representation on Genesis' board. The system posted net income of $18 million on revenues of about $400 million in fiscal 1998, said J. Thomas Jones, executive director and CEO of St. Mary's Hospital and a co-CEO of Genesis.
"(Logan General) for years was a very sound facility, and they did perhaps go down a path and overextended themselves, with regard to the development of this real estate mall venture," he said. "It's well on its way to returning itself to a profitable status now."