FGH to ask for interim financing
10/29/2013 - The Times West Virginian. By Mary Wade Burnside.
FAIRMONT - Attorneys for Fairmont General Hospital will be back in U.S. Bankruptcy Court in Wheeling on Wednesday to ask for approval for about $6 million in interim financing that should see the institution through the Chapter 11 process, which is expected to be completed sometime during the summer of 2014.
By the end of next week, said attorney Mike Garrison of Spilman, Battle & Thomas in Morgantown, a public court document should exist that will spell out the terms of the financial agreement.
“It’s really to run the hospital, to pay for professional fees and advisory fees and really to stabilize the finances of the hospital,” Garrison said Monday evening after he exited the executive session of the hospital board’s monthly meeting.
Fairmont General Hospital has had a whirlwind two months, declaring Chapter 11 bankruptcy in early September and then undergoing a leadership change at last month’s meeting, when it was announced that president and CEO Robert C. Marquardt had resigned and that vice president of patient services Peggy Coster would serve in the position as an interim.
The swift movement of events was acknowledged by chairman Mike Martin as he kicked off the meeting by saying, “First, wow, what a month. Seems like it’s been two months or three months.”
“It’s been five weeks, Mike, to the day actually,” replied board member Dr. Patrick Bonasso, referring to the meeting when it was announced that Coster would be coming on board as interim president and CEO.
“First, I’d like to thank Peggy,” Martin continued. “She just exhausts me just giving me updates, let alone everything she’s been going through. I really appreciate it. You’ve certainly stepped up to the plate. You look a little more rested now than you did a couple of weeks ago.”
Although Coster has the interim title, Garrison said later, the board of directors has not launched a search for her replacement as the hospital goes through not only the bankruptcy process but also picks up the search for a buyer or a partner, which Marquardt previously had acknowledged helped kick off the bankruptcy process to make the institution more appealing and viable to an interested party.
“For one thing, Peggy is doing an excellent job by all accounts,” Garrison said. “She’s making decisions. She’s tackled it headon. She’s a 30-plus-year veteran of the hospital and a native of Fairmont and of Marion County, so she really has her heart in it.
“It’s a stability thing as much as anything else,” he added. “It will provide stability during the pendency of the bankruptcy and for the sale-slash-partnership process.”
As for the sale/partnership process, that was begun at the end of 2011, with the hospital hiring a New York-based firm that rounded up both in-state and out-of-state candidates that expressed interest in either buying the hospital or forming a partnership to help stabilize the institution, especially with the approach of the federal Affordable Care Act that becomes law in 2014. The board’s goal, Garrison said, would be for Fairmont General to remain an acute-care hospital.
The last time Marquardt spoke publicly of the search, he said the field had been narrowed down to one in-state and one out-of-state facility. However, said Garrison, with the bankruptcy, a blank slate has been created and any institution can throw its hat into the ring.
Also, Garrison added, this time, negotiations for a partner or buyer should go much faster and will be part of the bankruptcy process, with an end result announced, once again targeted for this summer, at around the same time that the bankruptcy is concluded.
At the end of August, Garrison said, the Fairmont General Hospital board hired Hammond Hanlon Camp (H2C), with offices in Chicago as well as other locations, to help negotiate the facility through the process and find the interim financing that will be the subject of Wednesday’s appearance in bankruptcy court.
“Actually, that will be part of the bankruptcy process itself, is going back out to market, and that’s the area of expertise of H2C, the advisers who are here,” Garrison said.
Although the search for a partner or buyer dragged out and eventually stalled, Garrison does not expect that to be the case this time.
“We’re really just looking forward at the process within the bankruptcy context,” he said. “We’re in bankruptcy, and it will be a more expedited process and we anticipate a successful process.”
As for the $6 million in interim financing, that will be coming from a company called Fundamental, located in New York and Chicago, Garrison said.
The money will be debtor-inpossession (DIP) financing, a type of financing potentially available to an institution that has declared Chapter 11 bankruptcy that is in possession of a property.
“We expect it to be resolved and for the court to make a decision,” Garrison said. “We don’t presuppose approval but we are hopeful that it will be both supported by the other parties and ultimately approved by the court. We’ve got some discussions to continue with.”
The other parties include the creditors committee, the bondholders and the counsel of the U.S. Trustee Program, a Department of Justice entity that oversees bankruptcy proceedings.
The judge, Garrison added, is “far more apt to approve if the other parties and interests agree.”
Also as part of the bankruptcy process, Fairmont General officials have worked to reduce the institution’s cost of doing business. As such, the contracts of about 300 hospital employees belonging to the Service Employees International Union (SEIU) 1199, which were up at the end of this week anyway, were renegotiated to freeze any wage increases and also to have the employees pay part of their health benefit premiums. In all, said a union representative earlier this month, the employees gave up $1 million annually over the course of three years in the negotiations.
At the beginning of Monday’s meeting, Martin thanked 1199 as well as the Retail, Wholesale and Department Store (RWDS) Union Local 550, which also just underwent contract renegotiations. The next renegotiation of that union, which represents about 170-180 hospital employees, was due to take place in two years but the process was expedited as part of the bankruptcy.
Those negotiations ended last week, Garrison said.
“I don’t think there were a lot of cuts in 550,” he added. “There weren’t as many cuts to be made as with the other agreement. I don’t know what the exact final product was.”
Local 550 president Jeff Greenly, a Fairmont General Hospital employee, released a statement Monday.
“We are satisfied with the outcome,” he said.
Those agreements also will have to be approved by the bankruptcy judge, Garrison said, but will not be part of the proceedings this week, which instead will be more concerned with the interim financing.
The $6 million should see the hospital through the bankruptcy proceedings, Garrison added, noting that quantifying the figure within the context of Fairmont General’s budget was difficult.
“The budget, particularly now that we’ve filed for bankruptcy protection under Chapter 11 bankruptcy, the budget is very fluid. It’s really a weekly thing. The hospital itself is about an $85 million enterprise in terms of the yearly value of the hospital and all of its enterprises.”
After returning from executive session, the board of directors approved a motion to cut the hospital’s contribution to employee pensions from 6 percent to 3 percent. After the meeting, Coster noted that the figure had applied to the union employees but also would be extended to non-union employees. She declined to say how much of a savings that would represent for the hospital.
“It just brings us in line with other institutions,” she added.