Timeline set for Coffee's future

Coffee Health Group has embarked upon a three- to six-month process to find a solution to its ongoing financial problems or face further difficulties with its bond insurer, MBIA.

Interim Chief Executive Officer Jody Pigg said Coffee could continue to maintain its operations after six months, but it would be without the potential for growth or improvements.

"We have the financial stability to maintain health care services for several years at status quo," he said. "But wisdom and urgency, in part with federal reform on the horizon, says we need to act now and to put in place a plan which will stabilize and grow health care for the future."

Coffee includes Eliza Coffee Memorial Hospital and ECM East, both in Florence, and Shoals Hospital in Muscle Shoals.

Coffee has posted a small profit since its fiscal year began July 1, but that came largely through a series of layoffs.

"Financial losses in the last two years were such that legal stipulations in our bond documents require the hiring of consultants to assist in recommending and pursuing options to improve our financial position," Pigg said.

FTI, a group of independent consultants, was on campus from April through June and studied health care in the Shoals. Based on their findings, they created a list of possible options for Coffee, which include maintaining the competitive environment with Helen Keller Hospital in Sheffield, forming a consolidated health care system with Keller and/or seeking a third-party equity partner to help with their existing debt load.

Financial records indicate Coffee's debt is in the $140 million range, much of which resulted from the 1999 purchase of three hospitals: Humana/HCA, Russellville and Shoals. Russellville hospital has since been sold.

Pigg said accomplishing the latter of the two objectives would be the ideal outcome, but it's time to get serious about forming a business plan to make that happen. Included in that plan would be an assessment of what would be in the best interest of health care needs for the broader Shoals community.

Coffee has enlisted the help of Shattuck Hammond, a group of financial advisors charged with marrying the ideals of Coffee to potential buyers who could be either for-profit or not-for-profit organizations.

Running parallel to these discussions, however, are talks between Keller and Huntsville Hospital.

Pigg, as well as Keller CEO Bill Anderson and Huntsville CEO David Spillers, agree the consolidation and partnership efforts have progressed well. Among the potential scenarios that could emerge from these talks are a consolidation of goods and services at Coffee and Keller to reduce or eliminate the competitive health care environment that exists in the Shoals. Huntsville could also act as an equity partner.

"We and our board are committed to continued discussions with Coffee and Huntsville having a third-party role in that," Anderson said.

Like Pigg, Anderson said a plan must be developed that provides financial stability to move forward.

"We're not any closer; we're still working through it," Anderson said. "We're still looking at savings options that, were we to combine, would allow us to see enough savings to manage the amount of debt the organization would carry. That's a key piece. Ideally, we'd like to find a financial mechanism that would allow us to get out from under the MBIA obligation."

As yet, no one has emerged as willing or able to handle the financial piece of the puzzle.

Huntsville's Spillers said he's optimistic that, with time, Coffee could refinance its debt and allow for the creation of a single health care authority in the Shoals.

"We continue to look at options like that, but I don't know the details," he said, adding that Huntsville is willing to commit as much as $20 million in an interest-free loan to Coffee.

"Part of our issue all along has been we want to leave as much control in the Shoals as possible," Spillers said. "Clearly, if we're going to have more money invested, we have to protect that investment and want to have more influence on decisions that are made. We want to limit that role as much as possible so the community has the greatest influence."

Having a role in local health care would allow Huntsville to fulfill part of its strategic goal of growth across the entire north Alabama region. It would also mean local hospitals would continue to be public, not-for-profit facilities, Spillers said.

Complicating the issue, however, is the offer from RegionalCare Hospital Partners to purchase Coffee.

Based in Brentwood, Tenn., the organizations's CEO, Marty Rash, has reportedly made several trips to the Shoals to pitch his offer to buy Coffee and create a flagship regional health care system. The resulting local hospital would be a for-profit organization. Control, too, would shift from local entities to RegionalCare.

The TimesDaily made numerous calls to Rash and RegionalCare's offices seeking comment, none of which were returned.

To local physicians such as Dr. Jason Lockette, an ear, nose and throat specialist with a practice in Colbert County, now is not the time to compromise local control of health care.

"There are a lot of options out there that would allow us to retain control of health care locally," he said. "We need to explore them before we elect to go forward with a for-profit because we basically surrender that. We might have to in the end, but we need to explore every option before we go that route."

In October, the physician groups from Colbert and Lauderdale counties came together to form a single entity as a symbol of the need for unity in health care locally.

Although not a part of the physicians' group, Lockette said he's heard from countless patients who have expressed concern about the future of the Shoals' health care facilities.

"What they mostly want to know is if it's as bad as what they're hearing," he said. "I tell them my hope is that we find a way to get through this and maintain local control."

Local business leaders have also come together to try to aid the process and seek a solution. Among those involved is Steve Nesbitt, a BBVA Compass Bank president.

"We've looked at the numbers from the FTI report and seen some of the efficiencies the two hospitals could operate under as one health care authority," he said.

"There appears to be some room to handle that debt, but we don't know yet how feasible that would be. The debt is a big thing going forward, and we need to pull together and eliminate the duplication. How quick we can get there I'm not sure yet because we're only getting bits and pieces of the financial data at this point."

The hope is that, once the data is known, an option will become available that would allow Coffee to refinance its debt and begin looking toward the future and growth in the health care sector, Nesbitt said.

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