Trainer plans to resume talks with Capella on OCH lease

July 23, 2013 9:48:40 AM

Carl Smith - csmith@cdispatch.com

 

Oktibbeha County Board of Supervisors President Orlando Trainer asked fellow supervisors Monday to come to the 9 a.m. Aug. 5 county meeting prepared to discuss a 50-year lease proposal for OCH Regional Medical Center previously offered by Capella Healthcare. 

 

The Dispatch first reported the Franklin, Tenn.-based company was exploring a long-term lease for the hospital in May. The company originally inquired about the status of OCH in an April 23 letter to board members. 

 

Capella Vice President for Acquisitions Doug Johnson confirmed his company's interest in OCH two months ago but did not disclose how much was offered for Oktibbeha's county hospital. Trainer again Monday did not release the offer's financial specifics, but did say any potential transaction would have to address hospital debt. In 2008, county voters approved an almost $28 million bond for physical expansions and renovations to OCH. 

 

"No further offers have been made (since details of Capella's April letter surfaced), but there is a level of interest out there," Trainer said after the meeting. 

 

The board president asked supervisors at the end of Monday's meeting to use the next two weeks to analyze Capella's letter so the board can move forward with the offer next month. Supervisors did not comment on the offer or the scheduled discussions during the meeting. 

 

Hospital transaction rumors surfaced last year, and the county went through lengthy public discussions on the issue. Trainer attempted to move forward with a state-required comprehensive analysis of OCH's financial standings last year in preparation of a future bid but could not maintain board support on the action. 

 

At the time, supervisors estimated a potential financial analysis would cost the county about $35,000. 

 

Supervisors John Montgomery, Joe Williams and Trainer originally voted to pursue requests for proposals of such an analysis, but Montgomery later declared he would not support a deal after he independently met with OCH administration and reviewed the hospital's financial records. 

 

Following Monday's meeting, Montgomery again said the hospital is not for sale in his opinion. 

 

"It would be incumbent on the board to acknowledge the offer, look at it and see exactly whether it would be of interest," Trainer said. "We would not necessarily have to move forward on it, but it brings us back to the same crossroads with analysis. We can't move forward without one." 

 

If Trainer can rekindle traction for a hospital transaction, county voters could still force the issue to a referendum. OCH supporter and former Starkville Alderman Frank Davis procured about 2,000 signatures last year as supervisors mulled a possible analysis. That amount of signatures breaks the threshold needed to force the issue to the ballot box. 

 

"I'm of the opinion that if enough of the public wanted the hospital sold or leased, they'd have already produced enough signatures to take the issue out of our hands. I've yet to see any of those signatures," District 4 Supervisor Daniel Jackson said after the board adjourned. "We know there was enough public support to put tax dollars into the hospital. We'll listen to what comes through the pipe on Aug. 5, and I'm sure we'll have a large crowd turn out for that meeting." 

 

Cappella Healthcare was founded eight years ago and now operates 14 hospitals in six states. 

 

Last month, the company rescinded a bid to purchase a second hospital in Hot Springs, Ark. after the deal drew questions from the Federal Trade Commission. 

 

Capella reported a $9.7 million dip in first quarter earnings this year. It took in $187.2 million in revenue during the year's first three months, compared to the $196.9 million it received during the same quarter last year. The company previously cited an industry-wide rural floor settlement and Oklahoma's Supplemental Hospital Offset Payment Program as the causes for the decline. Revenue and expenses related to those to items were $13.6 million and $5.1 million, respectively, the company's website states. 

 

"Our first quarter results reflect solid progress on our strategic initiatives in spite of the continued significant challenges that our industry is facing," said Dan Slipkovich, Capella chairman and CEO, in the May 3 first quarter report. "Our hospital leadership is doing an excellent job as they continue to improve quality, enhance constituency satisfactions and manage costs." 

 

On March 3, Becker's Hospital Review reported Capella lost approximately $14.1 million in FY 2012 and a similar figure in the previous fiscal year.

Carl Smith covers Starkville and Oktibbeha County for The Dispatch. Follow him on Twitter @StarkDispatch