Money big factor in hospital discussions

By CINDY SIMPSON

rccindysimpson@bellsouth.net

Money is a hot issue for Harriman officials in Covenant Health’s possible takeover of Roane Medical Center.

Perhaps one of the biggest issues of all is how much Roane Medical currently has, one of several topics brought up during a recent meeting between both sides.

Harriman Councilman J.D. Sampson said he has heard concern about money the city would be giving up in hospital accounts.

Councilman Lonnie Wright said how much Roane Medical has is definitely a concern.

“We don’t mean to imply we don’t trust you; it is just business,” Wright told Covenant representatives. “We think we know; we think there are no other options to be considered.”

City officials said a balance sheet will be delivered to Covenant as close to closing as possible to get a clear picture of what is there.

Attorney Ashby Burks, who was retained by Harriman Mayor Chris Mason to study the proposal on the city’s behalf, said his documentation shows the hospital had assets of around $7 million as of Dec. 31, 2007.

There is also $3.9 million in liability and, as of June 30, 2007, a long-term debt of almost $2.7 million.

“We can’t leave that out of the equation,” Burks said.

Officials asked Roane Medical Center administrator Jim Gann if the hospital has enough money to make it in coming months.

Gann replied that the hospital would be able to swing payroll and make payments to accounts payable a little at a time.

“But I can’t make the bond payment,” he said, referring to a substantial bond payment due in May.

Gann said the problem is the payer mix and reimbursement.

Lawyers said they plan to meet and have a revised agreement to officials this week.

Liabilities the city could face in leasing the present facility to Covenant is also a concern to officials.

Burks said the contract is structured as a purchase of assets, but Covenant has agreed to pick up the liabili-ties listed in the financial statement.

However, the city would be liable for some things that happened prior to closing.

Burks said, for example, if someone has a claim for medical malpractice prior to closing, that would stay with the city.

The city would also be liable for any damages Covenant may suffer at the current facility because of something the city promised under the contract not being true.

Sampson asked if there is any way Covenant would agree to pick up any unknown future Medicare or Medicaid payments Roane Medical may owe.

Burks said that was something they could talk about, but told the city that is not the sort of thing most people go into lightly.

“People are reluctant to step into an open-ended unknown liability,” he said.

Sampson said his biggest fear is the city would receive the $650,000 promised for leasing the facility and then Medicare would step in and claim it is owed millions.

“We’re sunk,” he said.

Wright asked who would be responsible for general maintenance of the current facility.

Burks said Covenant would be responsible for day-to-day maintenance, but like other lease agreements, any major structural deficiency would be the property owners’ responsibility.

He suggested city council might want to look at a long-term agreement if a certificate of need is not received for the new facility Covenant hopes to build in Midtown.

Asking them to invest heavily in a building they did not plan to stay in longterm was not feasible, he said.

Burks said those costs are big for both parties, however, and perhaps if a big project comes up, an agreement can be reached where Covenant pays some into the facility.

“It could be a big-ticket item,” Wright said.

One of the biggest concerns is the aging sewer system. Gann said if any major projects come up, plumbing would likely be it.

Wright and other officials discussed the possibility of negotiating costs for capital improvements in the future if the lease goes beyond five years.

Mason agreed that the city would want some sort of protection if the lease went longer.

If Covenant does not get the certificate of need, its representatives would need to come back to the city to discuss the future, said Chad Clabough, Covenant vice president, managed care and government relations.

“I understand why you all would want to have some protection then,” he added. “We’d have to put some money into it.”

Mason said he hopes to vote on the amended proposal during the council’s regular meeting on March 11.

The meeting starts at 7:30 p.m. in the Harriman Utility Board conference room.