City to own hospital
Published 12:00 am Saturday, September 19, 2009
Before the end of the year, the city of Troy will take ownership of the local hospital.
After a year and a half of backing the doctors’ group, who took ownership of Troy Regional Medical Center in January 2008, TRMC will turn assets over to the city.
The city will in turn lease the hospital back to doctor owners for the full purchase price, which will total around $11 million.
“We’re going to own the assets — the real estate, the land and the building,” said Troy Mayor Jimmy Lunsford.
Since Troy Doctors Hospital, LLC. took ownership, the city has been in agreement to take over the hospital if doctors could no longer make loan payments.
While doctors will continue to run operations at TRMC, the city will essentially be the landlords for the hospital under the new agreement.
“The city will buy the real-estate and enter into a long-term lease to TRMC, so the city is the landlord and TRMC is the tenant,” said hospital CEO Gil McKenzie.
And just like any tenant-landlord agreement, if doctors fail to make rent payments liability will fall on the city.
“The provisions of default on the rent are very similar to any landlord-tenant relationship,” McKenzie said.
Lunsford has said previously the city has no desire to be in the hospital business, as it once was.
“We’re not in the hospital business,” Lunsford said. “The only way we’ll get in the hospital business is if they can’t make payments.”
However, McKenzie said with improvements made in the last year and a half, it’s an event he doesn’t foresee happening.
“Based on the progress made by TRMC since it was purchased by local doctors January 31, 2008, the prospects of failure and/or defaulting on the rent are remote,” McKenzie said. “TRMC’s financial strength is improving monthly, and with this renewed financial strength, the ability to make the monthly lease payments to the city are not at all in question.”
In fact, McKenzie’s confidence must be high since he and his company have been investing money themselves.
“We’ve needed additional operating capital for quite some time now, and there are different ways to get it. You can borrow it, or it can be invested,” McKenzie said. “I’ve got enough confidence in the turn around of the hospital that me and GHS (Giliard Health Services) are making a significant investment in the hospital.”
Still, if there is a default, the new agreement will make a smooth transition for the city to return to the hospital business.
The $11 million loan will include the hospital real estate price, debt for air-conditioning repairs and closing expenses and will be established through the city of Troy’s Health Care Authority.
Lunsford said the deal is really no different than what the city has and would continue to do with local industries.
“Their lease payments will be the full cost to the city,” Lunsford said. “Once they pay off all debt, they become owners of it again.”
Also in the agreement, doctors could make a complete payment of the remaining debt and take ownership fully.
The agreement will extend for 20 to 25 years, as it stands now.
McKenzie said the reason doctor owners chose the city of Troy as their financing vehicle is because of the low-interest rates a government body can secure.
“Going this route with the city is actually cheaper, so it’s a big advantage to the hospital,” McKenzie said.
Since the 14 physician owners took over, McKenzie said TRMC has made substantial improvements.
“New doctors, along with the existing dedicated medical staff have enabled the hospital to continue to show signs of resurgence in community confidence,” McKenzie said. “In addition, the quality and excellent care continues to improve as evident by a full two-year accreditation recently received from the Joint Commission hospital accreditation organizations.