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KH, Capella/MUSC letter of intent extended one month

June 30 is projected closing date for deal

Posted: May 28, 2015 5:23 p.m.
Updated: May 29, 2015 1:00 a.m.

KershawHealth, Kershaw County, Capella Healthcare and MUSC Health are extending a letter of intent (LOI) agreeing to a pending $36 million purchase of the county’s local healthcare system by one month from Sunday to June 30. That date will, according to a motion made Tuesday night by KershawHealth Board of Trustees Vice Chair Dr. Tallulah Holmstrom, coincide with the projected closing date of the Capella/MUSC Health deal. MUSC Health is the patient care arm of the Medical University of South Carolina.

Kershaw County Council also unanimously agreed to the LOI’s one month extension Tuesday evening (see “KCC approves KH, Capella deal extension).

The motion, the second Holmstrom made after a lengthy executive session, authorizes Board Chair Karen Eckford to execute the extension of the letter to “establish a new projected closing date of June 30, 2015.”

The motion passed unanimously, 6-0, with trustees Eric Boland and Susan Outen absent and another seat unfilled.

Holmstrom’s first motion dealt with the pending transfer of emergency management services (EMS) to Kershaw County, and also passed unanimously. According to her motion, the EMS transfer will include the execution of a quit-claim deed by the county for any interest it may have in KershawHealth-related real estate. In exchange, the healthcare system is paying the county $2.636 million to assist Kershaw County in operating EMS between July 1 and early 2017 when Capella will begin either paying taxes or fees in lieu of taxes.

Holmstrom’s motion made the EMS transfer “independent” of whenever the Capella/MUSC Health deal closes.

Kershaw County Council unanimously voted on a similar motion during its meeting Tuesday, but added the stipulation it would not execute the quit-claim deed on its interest in KershawHealth real estate until it successfully negotiates the healthcare system’s tax value with Capella.

Prior to Tuesday night’s executive session, KershawHealth Trustee Bobby Jones said he was concerned about how little information about the Capella/MUSC deal is being shared with the public.

“There’s a lot of concern out in the community, a lot of questions, of why the LOI has been delayed,” Jones said during trustee comments, referring to a previous extension from March 31 to Sunday. “I’ve been traveling around today and people ask me … why is it delayed? They’re looking for answers and I told them I don’t know. Really, I don’t know why. My thought is this: who’s responsibility is it? Is it ours? Is it trustees’ to inform the public to give them some idea of why it’s been delayed? Is it the county council? I really think the public needs to know why it’s been delayed with as much information as possible as they can have.”

Jones said the amount of time the board has spent in executive session discussing the issue also “doesn’t sit well” with some of the people who have spoken to him.

In response, Trustee Derial Ogburn said he has received no “blowback” concerning the LOI extension.

“My opinion is, we’re doing our due diligence. Capella has an obligation to its stockholders or investors to do due diligence. They need to find out as much about this facility before they sign on the dotted line. This board has an obligation to this community to make sure that before we sign on the dotted line, we know what it says and we agree with what it says,” Ogburn said. “I’m not going to rush into it. If it takes us another six months and Capella is willing to do that, then I’m not afraid to do it. I’d rather not, but I’m prepared to get it right rather than get it fast.”

Earlier in the meeting, KershawHealth CEO Terry Gunn announced he and other top administrators will be participating in a Capella orientation in June.

“Capella has asked the administrative team to go ahead and schedule time to (go) up for orientation at the corporate office. They’re paying for us to come up and spend time, learn their systems, learn who’s who and go through the new employee orientation with them,” Gunn said.

He said the orientation is planned for June 8 and 9, coinciding with the board’s next meeting. The board agreed to have Gunn and the other administrators going with him to join the meeting via conference call.

At the very beginning of the meeting, the board heard once again from former Camden City Councilman X. Willard Polk. As he did during his last appearance on May 8, Polk called himself a KershawHealth “revenue producer” as an oncology patient.

Part of his talk concerned the Capella/MUSC Health letter of intent, both in general and in terms of how the takeover will affect oncology, some of which grew out of a meeting he and another patient had with Eckford.

“One of the things that came out … was the lack of public interest in all these proceedings,” Polk said. “Well, there’s several answers for that. Number one, in order for the public to be interested, they have to have some knowledge, some idea, some basis for questions. Quite frankly, in my reading … many of these questions are, of course, taken up in executive session.”

He also noted Tuesday’s meeting conflicted with three others -- Kershaw County and Camden City councils and the Kershaw County Board of School Trustees, all met Tuesday night. Even on the board’s regular Monday schedule (the meeting was held Tuesday due to the Memorial Day holiday), Polk said those can conflict with commission meetings in the city and around the county.

“We cannot clone ourselves to be at all of these meetings,” he said.

Regarding the oncology department, Polk called it one of the most important functions within a medical center.

“Folks who are treated by oncology have somewhat of a desperate outcome. Some of us are lucky, in that we go into remission; many of us are not,” he said. “The outcome is somewhat questionable and dismal. Right now in oncology you have, effectively, about two and a half RNs who are not staring at a computer screen and who are not doing triage.”

Since meeting with Eckford a week ago, Polk said he has “poured over” the LOI in terms of oncology.

“I find it very interesting in my questions about what’s going to happen to the relationship between oncology patients and SCOA (S.C. Oncology Associates). Page 5 of the letter of intent references an affiliation with Hollings Cancer Center. It indicates to me that free, outstanding outpatient -- radiation, chemotherapy -- programs (will run) in partnership with Hollings Cancer Center,” Polk said.

He noted the Hollings center is located on MUSC’s campus in Charleston with its only Midlands affiliation at Palmetto Health Richland.

“So, again, I ask the question: what is going to happen to revenue producing oncology patients and their relationship with SCOA? I understand SCOA has a contract, whether it’s month by month or a 12-month contract, whatever. But I’m asking this board to look at retaining this relationship.

“For us to have to go to Charleston or elsewhere means greater aggravation, greater expense to families and many of these patients do not have the economic wherewithal to make these trips, to stay overnight, etc.,” Polk said.

He then moved on to the makeup of several financial stipulations in the LOI terms the Local Board of Trustees, regarding the $36 million payment Capella is making in exchange for the 40-year real estate lease and purchase of all of KershawHealth furniture, fixture and equipment.

“I looked at some of the escrow expenses. $10 million for indigent care, and I think $4.5 million for a resolution escrow account. By my calculation, and presumably that’s coming out of a net $36 million available to the hospital, that will leave $16.5 million of unencumbered money, presumably to be used in an operational (or) some capital expenditure manner,” Polk said, calling it a “a paltry sum.”

He compared it to Capella’s purchase of Hartsville’s Carolina Pines Regional Medical Center for $76 million.

“I’m somewhat familiar with that facility and I can tell you that the level of quality and variety of services and the capital investment in this facility far and away outvalues Carolina Pines,” Polk said. “So I think, in my opinion, unless there’s something there -- likelihood there could be -- of an additional (revenue) stream, but I don’t see it. We’re being shortchanged.”

Polk noted Capella has agreed to invest $55 million in capital expenditures during the first 10 years of its lease. He said that could be what is offsetting the $36 million net price to take over the hospital.

Polk ended his comments by talking about the creation of a multi-county public service district or “industrial park” made up of current KershawHealth property across the county in partnership with neighboring Chesterfield County. Polk said the creation of a public service district requires an act of the S.C. General Assembly, and said Chesterfield County does not currently have such a district related to healthcare.

Finally on the subject of the Capella/MUSC Health deal, Ogburn reported the board’s contract committee and legal staff looked at a “markup” KershawHealth received from Capella “in regard to moving toward the final agreement.”

“We made some comments back to them, asked them for some consideration of some changes we pushed back to them. We are awaiting their response,” Obgurn said, indicated most of his report would be part of the executive session.

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