It’s the ultimate game of chess.
On Thursday, the Walker County Hospital District — a government entity looking to keep the doors open at the near-bankrupt Huntsville Memorial Hospital — was thrown yet another curveball when the private Walker County Hospital Corporation rejected its offer to fund its upcoming bankruptcy.
The district had agreed to become the corporation’s debtor in possession lender, which would have “streamlined” the transition process by allowing the hospital district better control of asset pricing and bankruptcy fees.
However, the corporation board chose its lone secured creditor for this venture, a bank out of California.
“The district has proposed to serve as the corporation’s lender during the pending bankruptcy if a bankruptcy is commenced, offering the corporation board very favorable terms,” hospital district chairperson Anne Woodard said in a release. “Notwithstanding this offer, the corporation’s board chose another lender (the bank), even though they offered terms that are significantly less favorable to the corporation than those offered by the district.
“If the corporation board had accepted the district board’s offer to the lender, the process would have ultimately saved the taxpayers money, the bankruptcy process would have been quicker and more streamlined and the corporation bankruptcy estate would have benefited greatly from the favorable financial terms.”
Walker County Hospital Corporation is expected to file Chapter 11 Bankruptcy later this month. This has been confirmed by hospital district officials.
The corporation board president Mac Woodward and hospital CEO Steve Smith did not respond to The Item’s request for comment on the matter.
How did we get here?
The Walker County Hospital Corporation — a private non-profit organization — is preparing to file bankruptcy after losing millions of dollars due to inflated salaries, alleged insurance fraud and failing attempts to establish a network of clinics.
It all went south in September 2018 as the corporation was unable to meet payroll, according to records obtained by The Item. The interim CEO at the time, Michael Morgan, requested the hospital district provide subsidies that would “get them over the hump.” The taxpayer-funded group agreed, and supplied $2.9 million, as they went shopping for a new operator.
The hospital corporation currently owes the hospital district an estimated $5.4 million in missed rent payments.
“The district board has been doing everything in its power to address the corporation’s dire financial situation, including providing substantial financial subsidies to the corporation and deferring rent payments owed to the district,” Woodard added. “Even with millions of dollars in subsidies and rent relief provided by the district to the corporation, the corporation board has informed the district that it cannot avoid bankruptcy and may close the hospital.
“The district’s board of managers has been working to stabilize the hospital’s finances because the corporation has been unable to operate the hospital so that it is financially viable.”
The hospital district is in the final stages of negotiations with Community Hospital Corporation, a non-profit hospital management group out of Plano, to takeover operations in a joint-venture between the two groups.
That will now have to wait until the conclusion of the bankruptcy process.
“The district board remains committed to maintaining a viable hospital for the community and to improving hospital operations and services,” Woodard said. “The district board is offering to purchase the hospital corporation’s assets in the bankruptcy process and is planning to enter into an agreement with an experienced nonprofit company to operate the hospital in conjunction with the district.
“The district board’s priorities in making this offer are clear; maintaining a best-in-class facility here in Walker County that provides members of the public with the full range of medical services they require and deserve.”
The hospital district will meet in closed session next week to finalize an asset purchase agreement with Walker County Hospital Corporation.
The Walker County Hospital Corporation has been solely responsible for operating HMH since 2004.
Members of the private corporation board include Mac Woodward, Dr. John Knight, Dr. Dave Khurana, Ferne Frosch, Sam Burris, Jack Choate, Dr. Urmil Shukla and Brad Livingston. Elected hospital district board members include Anne Woodard, Judy Emmett, Dr. Curtis Montgomery, Jerry Larrison and Dr. David Toronjo.