Bankruptcy won’t stall FGH search
09/06/2013 - The Times West Virginian. By Mary Wade Burnside.
FAIRMONT - The search for a strategic partner for Fairmont General Hospital probably will not be stalled by the facility’s Tuesday filing for Chapter 11 bankruptcy, and in fact might be bolstered by it, said president and CEO Robert C. Marquardt.
“There is every possibility that someone will step in right in the middle of the process,” Marquardt said. “Not only is the potential there, but also that people or organizations that perhaps in the past had not expressed an interest will express an interest as they see us going through this process.”
The 94-page filing took place late Tuesday in U.S. Bankruptcy Court in Wheeling and showed that the hospital has $10 million to $50 million in both assets and liabilities, according to the
Associated Press. WesBanco Trust and Investment Services of Wheeling is its single largest creditor, owed more than $12 million for bonds. Several others are owed more than $1 million.
Marquardt expects the process, in which debts will be frozen and a reorganization undertaken, to take six to 12 months.
At the end of 2011, Fairmont General officials announced they had begun a search for a strategic partner. The hospital hired New York-based Cain Bros., an investment banking firm that specializes in hospital mergers and acquisitions. Eventually, the hospital signed nondisclosure deals with 11 facilities, which gave officials the freedom to begin talks without information about negotiations getting out to the public.
For the past year or so, Marquardt has stated that the number of facilities still in discussions was two, one from in state and another from out of state. He would not reveal if the in-state facility was West Virginia United Health System (WVUHS), which owns WVU Hospitals and United Hospital Center in Bridgeport, and with which the hospital previously had entered into a 60-day negotiation period.
As of now, “We haven’t had any direct conversation with any of those entities in a little while.”
However, “Virtually everybody we talked to that had expressed any interest in us at all said they would require for us to file for reorganization.”
That does not mean board members would not have taken this step without the search process, though.
“I’m not sure I would jump to that conclusion, but I’m not sure we would have looked at it as hard as we did,” Marquardt said.
What the next step on the part of a potential partner might be, Marquardt does not know.
“It’s speculation,” he said. However, “I think that whether it is one or both of those two prior potential partners or if it is somebody outside those two folks or those two organizations, I’m relatively confident we will have multiple expressions of interest.”
Last week, the hospital’s attorney, Mike Garrison of Spilman, Thomas & Battle, said a strategic partner could be a big part of the reorganization plan that will take place under Chapter 11 bankruptcy, as would restructuring liabilities and certain contracts.
On Tuesday, hospital officials will begin negotiating with one of two unions that represent Fairmont General employees, the Service Employees International Union (SEIU) Local 1190, which represents about 250 nurses, technicians and lab workers.
The other union, the Retail, Wholesale and Department Store (RWDS) Union Local 550, represents about 170-180 support services and maintenance employees.
“The contract with the SEIU employees expires Oct. 31,” Marquardt said. “It would be normal to be sitting down to negotiations about this time anyway.”
How the bankruptcy filing may or may not affect negotiations was a topic Marquardt declined to address.
“I’d prefer not to answer the question,” he said.
A date has not been set for negotiations with Local 550, he added.
SEIU representatives did not return phone calls Wednesday.
Jeffrey Greenly, the president of RWDSU Local 550, said the union’s contract was renewed last year and negotiations for the next one were not due to take place for another two years.
He does expect hospital officials to approach the union — made up of maintenance and housekeeping employees and nurses’ aides — soon.
“In Chapter 11 bankruptcy, my understanding is that the hospital will approach us,” said Greenly, an electrician in the engineering department. “We need to look at how we can save money, and Local 550 is willing to look at things with the hospital. We are willing to talk. We realize we all have to work together. We are committed to keeping the health care facility open and in the area. It’s a vital resource for Marion County.”
However, he noted, during last year’s contract negotiations, union members made “quite a few concessions,” including a change in health insurance that led from the benefit going from being funded by the hospital through Carelink to being funded by the hospital and the union through Blue Cross Blue Shield.
“And by doing so, we saved the hospital quite a bit of money,” Greenly added. “It was a substantial sum.”
Union representatives have been gathering up those figures “in case we need it,” but Greenly, making an educated guess, estimates that the sum might range from $600-$800 per month per employee.
Local 550 representatives are not as concerned about talks centering on salary, Greenly said.
“To be honest, we have built-in raises for contracts. If they ask for freezes on that, it’s something we would talk about.”
After announcing the plan to file for bankruptcy last Friday, Marquardt told the Times West Virginian that one of the biggest financial burdens Fairmont General faces is employee healthcare costs. The facility’s medical health insurance is self-funded with a third-party administrator responsible for keeping track of expenses and use.
About two-thirds of the hospital’s workforce of about 850 employees is represented by one of the unions. The 850 figure for employees also includes physicians, Marquardt added.
As for assets, Fairmont General actually does not own the hospital; the City of Fairmont does, as well as the lot the building is on. Until recently, the city could appoint the hospital’s board members, which included members of the Fairmont city council. A Marion County Circuit Court judge, in a ruling that was upheld earlier this summer by the state Supreme Court, agreed with Fairmont General’s board of directors’ decision to appoint its own members, however.
Of the liabilities listed in the filing, Marquardt said, the largest one in the “long-term debt” category would be $18 million for the Fairmont General HealthPlex, a complex located off exit 132 of Interstate 79 with physician offices, diagnostic and therapeutic services as well as a fitness center.
The complex opened at the very end of 2008 before Marquardt came on board in 2009 and at the time the projected was said to have a budget of $13 million.
While Marquardt stressed that during the Chapter 11 process the hospital remains open for business, he did agree that the process could hinder physician recruitment.
“Arguably, a little, yes,” he said.