Wise Regional Health System has made a bid to purchase North Texas Community Hospital in Bridgeport for $20 million, with plans to continue operating it as a branch of the Decatur-based medical center.
That offer was approved Monday night during a meeting of the Decatur Hospital Authority board.
NTCH was scheduled to file for Chapter 11 protection Tuesday or Wednesday in United States Bankruptcy Court in Fort Worth. That action will set off a process that would allow other bidders to submit offers on the hospital. But given the current climate in health care, all those involved believe Wise Regional’s bid is likely to be the only one on the table.
The bid includes $19 million for the real estate, equipment and other assets of the Bridgeport hospital. The other $1 million is a “debtor in possession” loan to provide operating funds so the hospital remains open to serve patients and the community throughout the transition.
The fact that Wise Regional has a plan in place to operate the hospital would be a key factor if another bidder should emerge.
“The bottom line is that there is an arrangement, and we’ve put in a bid,” Wise Regional CEO Steve Summers said after Monday’s meeting. “We have the ‘stalking-horse’ bid. Others can come to the table, but we are guaranteed a spot at the table. Anyone else would have to exceed our bid by a court-set amount.
“The facility makes more sense for us than it would make to anybody else.”
NTCH, which opened in August of 2008, has 35 beds and sits on approximately 19 acres. Its construction was financed with $59 million in Hospital Revenue Bonds issued by the Tarrant County Cultural Education Facilities Finance Corporation. The hospital has been in default to the bondholders since May of 2009.
“The bondholders are making substantial concessions to facilitate the continued operation and sale of the hospital,” NTCH CEO Max Ludeke said in a press release issued Monday night. “That includes an agreement to accept a reduction of over two-thirds of their debt to facilitate a sale, if necessary.”
Other creditors, including the City of Bridgeport, which covered interest payments on a $3 million line of credit for the hospital, are likely to be left hanging.
The Bridgeport hospital’s board had already met and approved the plan before the Decatur board’s Monday night session, Ludeke said.
POSITIVE FOR THE FUTURE
Summers cited the county’s growing population and Wise Regional’s expanded outreach as reasons to consider the purchase. He also noted that Wise Regional continues to add physicians and services as more people “stay at home” for medical care.
“We view this as a way to build on the good work that’s been done in Decatur as well as the good work that’s been done in Bridgeport,” Wise Regional board member Debbie Waggoner said after the vote. She echoed fellow board member Loyd Jackson, who commented, “I see this as a win for both hospitals.”
The Bridgeport hospital has the capacity to add a third floor and another 35 beds if needed, and the acreage available at the site would allow for additional expansion. Ludeke said the facility is averaging about 10 to 15 patients a day, including recovery and observation. It also offers outpatient and emergency services.
“The acquisition of the facility in Bridgeport, and the establishment of relationships with the medical community supportive of the Bridgeport facility, would help to ensure the ability to continue hospital services in the western portion of Wise County to better serve the community,” Summers said.
Having additional beds and surgical capacity within 12 miles could also delay the need to expand the Decatur hospital for three to five years, based on current growth levels, he said.
Ludeke, who has been at the Bridgeport hospital for about three years, said there has been a financial turnaround over the past year.
“For the first time, we have been able to generate positive revenues on operations and a positive cash flow,” he said in the news release. “However, this turnaround has not been enough for the hospital to generate sufficient revenues to pay the millions of dollars in debt it has accumulated to the bondholders, vendors and the Internal Revenue Service.”
Summers projects that within the first 12 months the Bridgeport facility will show profitability and a positive cash flow within the Wise Regional system due to added patient services. Combining management and consolidating contract services should provide further cost savings.
Summers said the addition of the Bridgeport campus would allow for continuity in the delivery of hospital services throughout the county, and could lower the overall cost of health services immediately and over the long term.
Both administrators agreed that it is a “win” for health care in Wise County.
“There’s a traditional rivalry, but the bottom line is, do we want health care decisions made by people in Dallas or Nashville, or do we want them made by people in Wise County?” Ludeke said. “We’ve had the benefit of five months of due diligence.
“This keeps operations functioning at capacity during the whole process,” he added. “We don’t foresee any lapse in patient care.”
That is of the utmost importance to Wise Regional as well, Summers said.
“We consider that the value – that it’s handed over as an ongoing entity,” he said. “It’s a beautiful facility.”
“This is a pretty important thing from the standpoint of health care in general for Wise County, which is what we’re all about,” Summers said.
John Neal, Wise Regional’s Director of Radiology, will be in charge of the transition, Summers said. Ludeke noted that, with a couple of exceptions, all of the physicians on staff at North Texas Community Hospital also have staff privileges at Wise Regional – and many other staff members work in both places.
That is another reason neither CEO expects other bidders to emerge.
“In the three years I’ve been there, we’ve talked with other systems,” Ludeke said. “There just didn’t seem to be a strategic market fit.”
“If they existed, we would have already found them,” Summers said.
TALKS BEGAN LAST SUMMER
Summers told his board he was approached last summer about pursuing an effort to combine the two facilities.
“Wise Regional was considered the logical choice because of its role in the county, and NTCH said their primary objective was to see inpatient health services continue to be offered in Bridgeport,” he said.
After extensive discussions involving legal teams for Wise Regional, NTCH and the bondholders, the Asset Purchase Agreement was drafted and approved by the NTCH board of directors.
Among the provisions of the agreement, NTCH will retain patient receivables and cash on hand at closing, with all of its other assets going to the acquiring entity.
If Wise Regional is not the successful bidder, the entity that acquires the Bridgeport hospital will have to pay them a “breakup fee” of $600,000 and would repay any amounts advanced under the $1 million debtor in possession loan.
Wise Regional would also be able to terminate the deal if NTCH’s assets lose more than $625,000 in value prior to the closing of the transaction.