County Consents To Hospital Lease Assignment

Huntsville, TN (2011-08-15) As Health Management Associates (HMA) finalizes the completion of it’s acquisition of Mercy Health Partners’ Tennessee assets, the Scott County Commission has granted its approval of the assignment of the lease of Scott County Hospital from Mercy to HMA. It has also ink an agreement with Mercy that would reinstitute lease payments on the facility, while agreeing to provide supplemental payments to Mercy for unsubsidized and charity care to Scott County residents.

With HMA seeking final approval of it’s acquisition of Mercy’s Tennessee assets from the State, the Scott County Commission provided one of the final pieces of documentation needed by the pair to submit to the office of the Attorney General for its review of the transaction. On Monday night, the Commission consented to the assignment of the lease of the Scott County Hospital, as amended, from Mercy to HMA. Although HMA will assume the lease, it will still expire on May 24, 2012.

In accordance with its lease agreement with Mercy, the county was required to approve the assignment of the lease to a third party operator; however, if Scott County identifies a new operator prior to the transition from Mercy to HMA, the approval may be moot.

In other action Monday night, the Commission further agreed to an amendment of the lease agreement which reinstituted rent payments on the facility from Mercy to the county, while also agreeing to pay Mercy for unsubsidized and charity care tendered to Scott County residents. In a second amendment to the lease, Mercy agreed to pay Scott County $1 million per year for use of the Scott County Hospital. The healthcare company will also pay the county an additional 15% of the annual lease for services provided by the county to the facility, which will generate $150,000 annually for the county’s use. In return, the county agreed to pay Mercy up to $1 million annually for unsubsidized and charity care provided by the hospital to Scott County residents. In May, the Commission passed a similar agreement; however, for clarification purposes, the documents were separated. The agreements were retroactive to January 1, 2011.

In a separate agreement, HMA agreed to assume both documents in its acquisition of Mercy’s assets.

The Commission voted 11-3, with Commissioners Ron Blevins, Sam Lyles, and Kenny Morrow casting dissenting votes, to consent to the assignment of the lease, the second amendment of the lease and charity care subsidy agreement, pending final approval by the County Mayor, County Attorney, and Community Development Chairman Paul Strunk.

In other Hospital related news, County Mayor Jeff Tibbals reported that Pioneer Health Services was continuing to make progress in its bid for the local hospital. “They have a framework to work through, and they are continuing their due diligence,” Tibbals stated. Jack Bryan, interim CEO of St. Mary’s Medical Center of Scott County, noted that Pioneer hoped to have their due diligence completed by September 14, 2011. “We’re still hoping to have everything in place by October 1, 2011, so we can avoid having two transitions,” Tibbals concluded.

As the county prepares to enter into negotiations with Pioneer, the Commission, upon the recommendation of Tibbals, established a negotiating committee. Members included Mayor Tibbals; Paul Strunk, Chairman of the Community Development Committee; Commissioners Brian Armstrong and Ron Blevins; Steve Phillips, local Hospital Committee Chairman; Mike Swain, Hospital Board member and businessman; and Dr. Cathy Martin, Chief of the Medical Staff at the hospital.