Lunsford: City won’t assume all hospital debts

Published 12:00 am Thursday, January 14, 2010

As the city of Troy prepares to take ownership of Troy Regional Medical Center, the fate of debts owed to local vendors remains unresolved.

Mayor Jimmy Lunsford said the city won’t be assuming any of the hospital’s outstanding debts when it takes ownership on Friday.

“What we owe will begin after 12:01 a.m. Friday,” Lunsford said.

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Hospital investor Gil McKenzie, whose company had invested 40 percent into TRMC ownership, said he isn’t sure exactly how the transition between Troy Doctors Hospital, LLC. and the city will take place.

Since the city already owned hospital property, essentially serving as the landlords, the owners simply had to forfeit their lease agreements to allow the city to step in.

What is more complicated, McKenzie said, is exactly what will happen to Troy Doctors Hospital, LLC., which is the official entity of ownership.

“We’re still in discussions as to whether it would be absolved or whether to stay in business,” McKenzie said.

McKenzie said there are outstanding debts on the hospital’s books, but he would not provide details on the amount of those debts.

Since Lunsford said the city will not take on any extra payments at the expense of taxpayers, McKenzie said doctors are working to determine how to handle those responsibilities.

Declaring bankruptcy, which would likely leave unsecured creditors unable to collect much if any of the outstanding debt, is an option McKenzie said hasn’t been discussed. “I don’t expect that’s going to happen,” he said.

However, he did not provide details on how the debts would be paid at this point.

Once details are determined, McKenzie said he would publicly share how much the doctors group owes and how it plans to compensate its vendors.

Aside from the real estate, which has already been purchased by the city of Troy’s Healthcare Authority and totals $11.5 million, the city’s cost will be the operating funds of the facility, estimated at $2.2 million each month, Lunsford said.

That includes payroll costs for the 265 employees at the hospital, which last pay period totaled some $290,000. Hospital employees are paid every two weeks.

Lunsford said as the city takes over, he hopes expenses will be covered through operating revenue.

However, he said certain payments have to come from city funds up front, which is why the council agreed to issue up to a $6 million line of credit to meet these needs.

The city also implemented a 1-cent sales tax that will become effective March 1, something that hasn’t happened since 1978.

Lunsford said this is the first time the city has implemented a tax specifically earmarked for the hospital.

As the transition takes place, Lunsford said the general public and hospital employees likely will not see any changes.

“At some point in time, all employees will be terminated by Troy Doctors Hospital and rehired by the Troy Health Care Authority,” Lunsford said.

All employees will be rehired, and those in authority will retain those same positions, he said.