1. Archive

Hospitals oppose county bankruptcy plan

A county plan to pull two Hernando hospitals out of bankruptcy court will not work, according to the hospitals' attorney.

Instead, the plan will add to an already substantial debt load now carried by Brooksville Regional Hospital, Spring Hill Regional Hospital and the PineBrook Regional Medical Center, according to lawyer Rob Soriano.

In a letter sent Friday to County Administrator Chuck Hetrick, Soriano said the county's proposal would immediately cost the hospitals about $15-million _ costs that "increase (the hospital company's) debts so much that its board cannot, in good conscience, agree to them."

Hospital officials said Friday that board members believe if they approve the county's plan, they will fail in their duties to the hospital.

"That's what they're trying to say in this letter," said Regional Healthcare president Jay Dickson. "We think (the county proposal) had some room for discussion, but not if you load us up with additional debt."

Hetrick was on vacation Friday and could not be reached for comment. County Attorney Bruce Snow also could not be reached for comment.

An attorney for the hospital company's largest creditor said the impasse could mire Regional Healthcare in bankruptcy court for years.

Already, the company has been protected from its creditors for more than two years. Regional Healthcare fled to bankruptcy court in 1993 because it couldn't pay its debts. The biggest bill was owed to CNA, a Chicago insurance company that bought the bulk of a $57-million hospital bond issue and loaned the hospital company another $4-million.

Those bonds financed the upgrading of Brooksville Regional Hospital and the construction of the 75-bed Spring Hill hospital. Even before Spring Hill Regional opened its doors, the hospital company was in turmoil. Brooksville physicians boycotted the facilities, saying company policies penalized them and benefited Spring Hill doctors. Admissions plummeted. Vendors refused to ship supplies unless they were paid cash on delivery. Board members and top hospital administrators at the time were reviled.

When it came time to pay the bond debt, the hospital company didn't have the money.

Once in U.S. Bankruptcy Court, the company ousted its leaders and got a new board of directors, which hired Quorum Health Systems to manage the facilities. Regional is attempting to reorganize its debt.

But Regional and CNA have a fundamental difference in their view of how that reorganization should occur.

CNA argues that the hospital company is profitable and can pay its debt. Regional argues that the debt is too great and ought to be reduced by one-third.

Regional representatives say the hospitals and the doctor-office buildings are worth $40-million, but carrying debt of more than $60-million. They've asked the bankruptcy court to let the hospital repay CNA and the other bondholder 30 cents for every $1 owed.

The county has an interest in the resolution of the hospital's financial problems because taxpayers own Brooksville Regional and the licenses to operate both Brooksville Regional and Spring Hill Regional hospitals.

The county's plan for reorganizing the company's finances involved reissuing some of the $57-million in bonds as seven-day "floater" bonds, bonds with rapid turnover and low interest rates. The new bonds would replace some of the hospital company's existing high-interest bonds.

The county also proposed that the hospital company pay the interest on its debt that has been accumulating since the bankruptcy filing and pay the legal fees and other fees accumulated by the county, CNA and others involved in the bankruptcy dispute.

The interest and fees could total $15-million, Soriano said in his letter to Hetrick.

"We don't know what the fees could be," said Dickson, the hospital company president. "I would guess, several million dollars. We know what our (legal and other) fees are. And we anticipate theirs to be significantly greater. If you go into the courtroom, you can see what I mean. We have two or three people (at the lawyers' table), and they've got 19."

Dickson said the company doesn't have the cash to pay those amounts and to pay other bills, which come due as soon as the bankruptcy is resolved.

"If we do the county's plan, at the time of the agreement, we'd have to borrow money, in an amount that could be in excess of $7-million," Dickson said.

"So we would be borrowing on top of the debt we've already got."