Hospitals seek partnership

Board members from Huntsville Hospital are mulling the most recent proposal submitted by Coffee Health Group and Helen Keller that would combine the two local systems and form a partnership with Huntsville.

"We got the proposal last week, and we're doing our homework on it now," said David Spillers, chief executive officer at Huntsville Hospital. "It's in committee now."

Spillers didn't rule out the possibility of a special meeting later this month if a vote on the proposal is warranted.

Keller CEO Bill Anderson said he and Jody Pigg, interim CEO at Coffee, created the proposal to outline the issues of a potential merger in an attempt to keep the process moving forward.

"It involves how much of an investment they are willing to make in the proposed new system to allow us to talk about better managing our debt going forward," Anderson said. "Sixty million is the range we're discussing. But there are several options, some of which could involve a greater Huntsville Hospital presence" on the resulting board.

Talks among the three entities have been ongoing since late summer when FTI, a consultant group brought in by Coffee, recommended Coffee seek solutions to its ongoing debt issues. One of these options was to merge with Keller, which is in Sheffield, while another was to involve a third-party equity partner.

Much of Coffee's

$140 million debt comes from the purchase in 1999 of three hospitals: Shoals Hospital in Muscle Shoals, Humana in Florence and Russellville Hospital. Russellville Hospital has since been sold, but Coffee continues to operate Shoals Hospital. It renamed the Humana facility ECM East in Florence. Coffee's main campus is Eliza Coffee Memorial Hospital, also in Florence.

MBIA manages Coffee's debt, and Anderson said the goal is to get MBIA out of the picture to allow health care in the Shoals to move forward. He called the current proposal a "positive step and a step toward what both (hospital) boards state as their goal."

Getting there, however, means piecing a financial puzzle together with this proposal as a single portion of the puzzle, he said.

"We know the numbers work better if we can reduce the amount of debt to be carried," Anderson said. "So the combination of some equity from Huntsville would allow us to reduce the amount of debt and, under the financing scenario, would allow us to work with a combination of some banks or bridge loans from appropriate institutions."

In addition to Coffee's $140 million debt, Keller comes to the merger table with a debt load of around $40 million.

Anderson said the debt would be combined if a merger were reached, which would then allow for the entire debt to be refinanced at a lower interest rate.

Coffee has also retained the help of Shattuck-Hammond, financial advisers, who are charged with aligning Coffee's goals with other health care organizations that might have an interest in purchasing Coffee.

RegionalCare Hospital Partners, an organization based in Brentwood, Tenn., has been at the forefront of these discussions so far, but Pigg has said this is a three- to six-month process and no deals have been reached.

"We are trying to establish a framework for future discussions with Huntsville and Keller," Pigg said.

"We will continue to explore all of (Coffee's) options over the next weeks and months."

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