A 33-year-old trial lawyer in southern Illinois with no hospital administrative experience paid about $1 million at an auction Dec. 7 to buy a 60-bed hospital that's been closed since last July.
And that's not all. The lawyer bought the facility on the spur of the moment and then realized he didn't know what to do next. Now he hopes to donate the building to an area university to run as a medical center.
John Simmons, one of six lawyers at the Simmons Firm in the St. Louis suburb of Wood River, Ill., was the only bidder in the 10-minute auction. His offer met the minimum price set by the board of Wood River Township Hospital to take the hospital off the public tax rolls.
"It seemed like a heck of a deal. There are no other hospitals in Wood River," Simmons says. "And it would be a shame for this to remain closed and be a white elephant. Reopening it will benefit the community."
The hospital's closing last July made local headlines as the fourth St. Louis-area hospital to go out of business in the past year. Simmons says that when he heard the hospital had closed he had no plans to buy it.
Asked why he did it, Simmons says, "I haven't a clue."
He says he was on his way to a doctor's appointment 30 miles away in St. Louis on the day of the auction when he turned around, canceled his appointment and hurried over to the bidding.
"Five minutes later I owned a hospital," he says.
Just after the auction, Simmons said he planned to operate the 51-year-old hospital himself and met with local doctors to discuss managing the facility. He wasn't sure then whether to reopen it as a long-term-care center, specialty hospital or outpatient surgery center.
Sobered by the challenge, several weeks later Simmons is looking to donate the hospital to a university health system in St. Louis.
"I'll sell some of the land, vehicles and other things myself and give the hospital away if the university makes me two guarantees: They'll operate this as a medical facility and will at least agree to interview the people who were laid off," Simmons says.
He doesn't know when Wood River will reopen.
The hospital closed after gushing a stream of red ink. It lost $1 million on 1998 revenue of $17.3 million, according to Solucient, an Evanston, Ill.-based healthcare information company. The hospital hasn't earned a profit since 1995.
After losing $5.4 million in fiscal 1997, the hospital board hired Brentwood, Tenn.-based for-profit management company Brim Healthcare, a subsidiary of Province Healthcare Co., also based in Brentwood, which immediately laid off 70 of the hospital's 270 employees to trim expenses.
Greg Voss, vice president of operations for Brim's 14 Illinois and Wisconsin facilities, says before Brim was hired, Wood River had a different board of trustees and hadn't had a full-time chief financial officer for years.
"The normal financial information was not routinely reported to the board," Voss says. "Wood River physicians had a poor public image in a competitive market."
Brim cut the net loss to about $1 million in fiscal 1998 and 1999 but couldn't turn the corner to profitability.
Last year, Brim recommended selling the hospital to a local medical group, but that plan fell through July 12, 2000, when the township brought suit one week earlier to declare the 1993 bond issue void and return $7 million already paid by local taxpayers. A February court date has been set for trial.
"The township killed that deal," says Voss, adding that the medical group didn't want to become involved in a costly lawsuit.
Because of the losses, it didn't seem likely that hospital revenue would ever pay off bond issues of nearly $30 million. So the hospital's board filed for a court-supervised liquidation.
Wood River Township Attorney Rod Pitts says the bonds were used for operating expenses, legal fees, settlements and improvements. The first bonds were issued in 1985 and were refinanced in 1993 to include tort protection for the hospital, which became self-insured.
Wood River Township Hospital was the last township-owned hospital in Illinois.
Pitts says the hospital suffered from poor management for years before finally bringing in Brim to turn it around in 1997.
"People lost confidence in the hospital. It lost money and patients and failed to pay for its operating needs and the bond issue," he says. "Brim did a good job and helped, but it was not sufficient to take the hospital out of the hole."
Because the hospital has defaulted on the bond payments, taxpayers are on the hook to repay them.
The township is asking a Madison County Circuit Court in Edwardsville, Ill., to declare the bond issue invalid, which would remove the burden from taxpayers.
He says Illinois law wasn't properly followed and taxpayers never had a chance to vote on the 1993 bond issue. Hospital board members, individually and collectively, are named in the lawsuit, along with Nuveen Premier Municipal Income; Cincinnati Insurance Co.; Amalgamated Bank of Chicago, the escrow agent; and several Madison County elected officials.
If the township wins its suit, the creditors will be owed millions.
Pitts says there's some question about whether Simmons' hospital purchase check would go to bondholders or taxpayers, one of the issues the court will rule on.
"We think it should go to the district's 16,000 taxpaying households," he says. "Right now they're paying for something they don't even have."
Simmons says he is not liable for the bond debt, but he conceded that the facility's reputation has taken a beating in recent years, as layoffs and poor relations with doctors, politicians and taxpayers soured the community on the hospital.