Coffee officials review ‘serious' purchase bid

FLORENCE - A private Tennessee health care company is offering to buy Coffee Health Group's medical facilities in the Shoals.

RegionalCare Hospital Partners, in a letter addressed to Coffee's brokerage firm, said it is willing to buy all facilities under Coffee's umbrella, including Eliza Coffee Memorial Hospital and ECM East, both in Florence, and Shoals Hospital in Muscle Shoals.

Terms of the proposed purchase have not been released by Coffee Health Group or RegionalCare.

Florence Mayor Bobby Irons, chairman of the Coffee board, called the offer "serious."

"We haven't taken action on it at this time," he said. "It's one of many items on our agenda of options we will try to pursue when we meet."

Coffee members were originally scheduled to meet Monday, but that meeting is being rescheduled. Irons said they will meet within the next two weeks.

If the purchase is made, ECM Hospital, which has always operated as a public hospital, would become private.

Since failing in 2008 to meet an aspect of its bond covenant with MBIA, its bond insurer, Coffee officials have been exploring options to bring financial stability to their operation.

The covenants require Coffee to maintain the equivalent of 90 days operating expenses in reserve and keep $1.15 million on hand at all times to meet its monthly bond payment obligation.

The hospital group pays $1.2 million monthly toward its overall bond debt of about $140 million. In June 2008, Coffee had only $1.11 million on hand for the bond payment.

The debt is largely the result of the 1999 purchase of Shoals Hospital, Russellville Hospital and Florence Hospital.

Russellville Hospital was later sold.

The deal reportedly would eliminate Coffee's debt, with RegionalCare then likely taking over ownership.

Already, MBIA has required Coffee to bring in FTI Consultants, a move to help manage Coffee's budget. The health group fell $8.2 million short of its anticipated revenue in last year.

The board has approved a $172 million budget for the fiscal year, which began July 1, and hospital administrators laid off between 65 and 70 full-time employees in July to reduce its personnel expenses.

Jeff Atwood, spokesman for RegionalCare Hospital Partners, said if the purchase were to happen, ECM would cease to be a public community hospital.

While a public hospital must treat anyone who needs medical care, a private facility has the option to transfer a patient, once stabilized, to another facility if that patient does not have medical insurance.

"The goal of RegionalCare is to develop a family of hospitals and create value by growing the organizations," he said.

Coffee would be the first purchase by RegionalCare, which opened under that name in July with a $300 million investment by Warburg Pincus, a private equity firm. RegionalCare's headquarters is in Brentwood, Tenn.

RegionalCare's top executives, Martin Rash, chief executive officer, and John Rutledge, chief financial officer, have spent the majority of their careers at Province Healthcare. Province merged with LifePoint Hospitals in 2005 to create a hospital company to provide health care in non-urban areas. The organization includes 50 hospitals across the country.

Although the proposal could solve Coffee's debt crisis, Irons said, officials are considering other options, among them discussions with Helen Keller Hospital in Sheffield and Huntsville Hospital.

"It's just talk at this point, but we're looking for a solution that would be best for the community," he said. "We also have to consider the kind of health care we could end up with, we have to consider the physicians, and we have to consider the citizens that are expecting and want and deserve the highest quality health care."

Because Coffee has missed an aspect of the covenant, it is unclear if it will have a say in its future.

Kevin James, spokesman for MBIA, said he was unable to comment on the specifics of Coffee's standing with his organization.

Irons, however, hopes Coffee would have options available.

"If we were in default on our loan, then no, we shouldn't (maintain control), but we're not. We've made our payments and have stayed abreast of what we owe," he said. "Hopefully, we will have some input in what is best for our community, and we hope MBIA will be able to recognize and appreciate what is best for our community."

Michelle Rupe Eubanks can be reached at 740-5745 or michelle.eubanks@TimesDaily.com.