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County exploring role in hospital sale

By BOB HANSEN - bhansen@newsexaminer.com

Local government is becoming involved in the court-ordered sale of Fayette Regional Health System but the county is not interested in buying the hospital, according to two of the three members of the Fayette County Board of Commissioners.

Local government officials have been discussing the county’s role in the hospital sale for a couple of months, Gary Naylor, president of the commissioners, said on Saturday. The discussions have been in executive session, closed to the public.

On Thursday, the commissioners voted during a special public meeting to hire Timothy W. Kennedy to help guide the county’s involvement. Kennedy is an Indianapolis-based attorney who specializes in health law. The Council Council, which must approve expenditures, has scheduled an executive session to discuss the matter on April 2.

Kennedy, a shareholder in the firm of Hall Render, will help arrange meetings between the commissioners and some of the parties that are interested in bidding to buy the hospital, according to Naylor and commissioner Dale Strong. The commissioners agreed to a confidentiality agreement so they can speak to the potential buyers.

The hospital is in Chapter 11 reorganization under the U.S. Bankruptcy Code. Federal bankruptcy court has ordered a sale of hospital assets by auction. Bids are due April 30 and the sale is expected to be completed by mid-May.

It’s thought that some of the bidders in the bankruptcy auction may ask for the county to become involved with them. “We’re not sure of all the details,” Naylor said.

Nevertheless, the county may need to ante up as much as $50,000 for the attorney’s services, although Naylor is hoping for between $5,000 to $15,000. Strong said Kennedy will be paid $560 an hour and the county might be able to recover legal fees from the entity that buys the hospital.

As to what form the county’s involvement might take, Naylor said it’s possible that buyers might want to obtain money to help finance the purchase from the Rural Development program of the U.S. Department of Agriculture. Obtaining that money, often available at low interest rates, might require involvement of a government body.

Another possibility is some kind of public-private partnership that could give the hospital a better reimbursement rate from federal programs, Naylor said. Current hospital management has said that Fayette Regional gets a much lower reimbursement from programs such as Medicaid than some larger hospitals with a different ownership structure.

“Evidently, before they (potential buyers) get too deep into the bidding process, they want to talk to county officials,” Strong said. “Hall Render will introduce us to these people. Other than that, he (Kennedy) wouldn’t be doing anything unless these people want him to.”

Contacted Friday by the Connersville News-Examiner, Kennedy said he didn’t want to comment on his role in these discussions until after further talks with the commissioners.

The hospital has stated that the identity of interested buyers has not been revealed to it.

The county has agreed to a confidentiality agreement for these discussions. Strong said potential buyers do not want other buyers to know who is interested.

Naylor said there had been some discussion of creating a county-owned hospital. However, that would have required more time than allowed under the provisions of the Chapter 11 sale. Still, purchase “is not off the table.”

Still, he said, he wants the public to know that the commissioners “are not sitting on our hands.” 

“We’re talking about the health of our community,” he said. Having health care close by is necessary, he said.

Strong said, “If we can do anything that protects the best interests of the residents, we should. At the same time, I’m very insistent to not encumber the taxpayers. It’s not their fault and it’s not their problem.”