By next month, 132-bed Logan (W.Va.) General Hospital's four-year stay in bankruptcy protection could be over, with the hospital being sold and converted to for-profit status in the process.
The proposed sale of the hospital to Health Management Associates, Naples, Fla., for $72.1 million is expected to come before the U.S. Bankruptcy Court in Charleston, W.Va., in November. Two other investor-owned companies, Community Health Systems and LifePoint Hospitals, both based in Brentwood, Tenn., also could bid on the hospital. Both companies made proposals to the board of the hospital's owner, Logan Medical Foundation, but lost out to HMA. If either decides to bid, an auction would be conducted in bankruptcy court.
A sale order setting a date for the sale to be considered, or the auction conducted, was expected last week, but had not been filed by deadline, said John Tishler, a lawyer representing LifePoint in the case.
HMA is the front-runner for Logan General, which has been in bankruptcy protection since October 1998. But at a hearing earlier this month, U.S. Bankruptcy Court Judge Ronald Pearson made it easier for Community and LifePoint to beat HMA's $72.1 million bid.
HMA and the Logan foundation announced their proposed deal in August, without releasing the terms at the time. They agreed to a $2 million breakup fee-to be paid to HMA if another bidder wins during a bankruptcy auction-and a $2 million "overbid" amount, court records filed last month show. In other words, under the bidding terms proposed by HMA and the foundation, another suitor would have to bid at least $4 million more than HMA, or $76.1 million.
Pearson cut the overbid amount in half, to $1 million, but denied a request by LifePoint to trim the breakup fee, said Tishler, a lawyer with Waller Lansden Dortch & Davis, Nashville. Community Health and LifePoint, both of which the foundation board rejected in the earlier round of bidding, now may bid as low as $75.1 million and win the hospital, Tishler said.
This is not the first time investor-owned chains have vied for Logan General. In June 1999, Community Health, HMA and Province Healthcare Co., Brentwood, all expressed interest until a plan surfaced for Logan General to join the former Genesis Healthcare system. The three West Virginia hospitals that formed Genesis split up before Logan General could join the former system, however, putting the hospital back in play.
Another party interested in the future of Logan General is a consortium of consumer groups, which has friend-of-the-court status in the case. The consortium includes a local not-for-profit organization and two national consumer advocates, Consumers Union and Community Catalyst. Renee Markus Hodin, a lawyer for Community Catalyst, said the consortium is concerned mostly with preserving the services offered by Logan General. But, Markus Hodin added, if the hospital fetches a higher price, she hopes that means more money for the not-for-profit healthcare foundation that will be endowed with some of the sale proceeds.
Logan Medical Foundation was plagued by fraudulent business deals, including a failed shopping-mall development. The foundation listed $65 million in debts when it filed for bankruptcy. In April 2001, a federal judge sentenced C. David Morrison, the hospital's former administrator, to eight years and one month in prison for diverting hospital funds to the mall and other schemes. The 4th U.S. Circuit Court of Appeals in Richmond, Va., upheld Morrison's conviction in February, and last week the U.S. Supreme Court denied his final appeal.