OKTIBBEHA COUNTY – The sale of OCH Regional Medical Center to Baptist Memorial Health Care has officially closed, with Oktibbeha County poised to pocket about $30.5 million in net proceeds.
Baptist paid about $49.1 million to purchase the newly named Baptist Memorial Hospital-Oktibbeha County, a roughly $5.9 million decrease from the original $55 million purchase price announced in August.
County Administrator Wayne Carpenter said the drop reflects pre-closing expenses the county was required to cover in the sale, like accounts payable and splitting some lease obligations with Baptist for things like specialty equipment.
Additionally, paying off the hospital’s outstanding debt and costs like attorney’s fees cut into the net proceeds.
“We’ve got to pay off all of our expensive advisers that helped us through this, pay off the bonds, all that kind of stuff,” Carpenter told The Dispatch. “Kind of like when you close on a house, you’ve got to pay your real estate agent. So after … we paid those fees, it was $30,513,969. That’s the net proceeds received from the sale.”
Oktibbeha supervisors, after approving the sale in August, have spent the last month negotiating terms of the purchase agreement.
Baptist announced the hospital’s new moniker Wednesday on Facebook. Baptist President and CEO Jason Little told The Dispatch in August the neighboring Baptist Memorial Hospital-Golden Triangle in Columbus will keep its name.
Moving forward, Carpenter said supervisors will have to determine whether to spend the proceeds or how to save them, with proposed plans so far ranging from dividing some or all the money among the five supervisor districts for discretionary projects to investing the money in an endowment.
‘No cash, no debt’
Carpenter called the sale a “no cash, no debt” transaction, meaning Baptist purchased the hospital’s operations and assets but did not take over its cash accounts or pay off its debts. Both of those responsibilities fall on the county.
That means the county is currently undergoing a cash sweep of the hospital’s accounts to move the money under county control. With it on hand, the total gross proceeds the county receives is closer to $60 million, Carpenter estimated, though it is not for spending.
Board Attorney Rob Roberson told The Dispatch that money will be set aside for a variety of obligations, ranging from potential lawsuits to health insurance claims that would date back to before the sale closing.
“Everything that we have set aside for every bit of this stuff (is to ensure) there’s not an issue that might come back on the county,” he said.
Because the hospital provided its own health insurance and retirement benefits to employees, the county must set aside some proceeds to cover those obligations.
Carpenter said the insurance company will continue processing medical bills incurred before sale, so the county has to escrow funds to pay those “run-out” claims.
“We’re going to put into escrow an amount of money that we feel comfortable will cover the … the Blue Cross Blue Shield health plan run-out,” Carpenter said. “They’ve got 120 days or (until) Jan. 31 to get all their claims submitted. And once they’ve done that … we’ll take that money back out of that escrow fund that we’re setting up to cover that.”
Likewise, Carpenter said there are still about 920 current and former employees enrolled in the hospital’s retirement plan, which the county will oversee until it is rolled over to individual accounts.
“Now that cash doesn’t live on the county’s books,” Carpenter said. “In other words, it’s a separate plan in and of itself, but we have to administer closing it down, and that’s going to take a while.”
Money will also have to be set aside to cover potential legal claims filed against the hospital while it was under county ownership. Funds will be escrowed to cover potential claims until the statute of limitations runs out.
Debts and assets
The largest expense cutting into the county’s proceeds came from the hospital’s outstanding debt of about $15.6 million, which was previously being serviced through property tax millage.
Roberson said the supervisors will set aside a portion of proceeds – about $13.6 million – into an interest-bearing, restricted account to cover the bonds, with any interest accrued applied to the pay off.
“The bonds have to be paid out over a certain amount of time,” Roberson said. “That money is set aside, and the interest that it accrues is included in the payoff.”
OCH owned 10 clinics and physician practices in Starkville, most of which were included in the sale to Baptist. Roberson said one property – Stewart Ear, Nose and Throat Center at 4 Professional Plaza – was temporarily excluded due to unresolved tax issues, but the county expects Baptist will acquire it as well.
“All of those lease agreements are in effect until the end of those leases,” Roberson said. “Then (Baptist will) have to renegotiate or whatever they’ll do at that time.”
McRae is a general assignment and education reporter for The Dispatch.
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Quality, in-depth journalism is essential to a healthy community. The Dispatch brings you the most complete reporting and insightful commentary in the Golden Triangle, but we need your help to continue our efforts. In the past week, our reporters have posted 34 articles to cdispatch.com. Please consider subscribing to our website for only $2.30 per week to help support local journalism and our community.
