HMC contract offers no assurances for how long it will stay open or employment

In an effort to keep the doors open at Habersham Medical Center (HMC), the county commission and hospital authority have agreed to fast-track an agreement with the Hall County Hospital Authority and the City of Gainesville to acquire the property and turn it over to Northeast Georgia Health Systems (NGHS) to run. This will include the transfer of property and operations.

While many have hailed this as a life-saving measure for HMC, there are no assurances in the contract the hospital will remain open or that current employees will keep their jobs.

$51 million bond debt

The deal approved by Habersham County commissioners at a special called meeting on January 10 provides only for hospital operations during the transition period now through July 1. After that, whatever happens to and with the hospital will be at the sole discretion of its new owners. Meanwhile, Habersham County taxpayers will be left to pay off the debt on bonds secured by the Habersham County Hospital Authority in 2014.

According to the Authority’s 2021 audited financial statement, as of 2023, the principal amount owed on the hospital is $34,880,000, with interest of $16,448,921. That means county taxpayers still owe $51,328,921 on a hospital they will soon no longer own.

The debt will not be paid in full until 2044.

By the time NGHS acquires HMC, it will have invested $15 million in capital improvements into the property, but that’s basically money in its own wallet. None of those funds applied to the bond debt based on the terms of the original Option to Purchase agreement signed by Habersham County commissioners in 2019.

Tyler Williams was heavily credited with negotiating that deal. He was named HMC’s CEO the following year and is still serving in that role.

So what exactly is Habersham County getting out of the deal? The hope and expectation that it will be able to keep its local hospital open. At least ten rural hospitals in Georgia have closed in recent years, in large part, experts say, due to the state’s refusal to expand Medicaid.

After Tuesday night’s vote, NGHS President and CEO Carol Burrell alluded to HMC’s future saying it “will be the key to physical and economic wellbeing for generations to come.”

Still, there are those who are concerned by the contract’s lack of guarantees.

“Is there a guarantee that the hospital is going to stay open?” local attorney Doug McDonald asked Habersham County Commissioners during their January 10 called meeting.

“There’s definitely a guarantee if we don’t do this, we have about six months, and the doors will be closed,” replied Commission Chair Bruce Palmer.

McDonald repeated, “So there’s no guarantee?”

Palmer replied, “There’s no guarantee that tomorrow any of us will be here.”

No plan for payback

While there are no contractual assurances the hospital will stay open, there’s also no guarantee the hospital will repay the money Habersham County is pumping into it right now – up to $6 million to keep it going until July.

The newly-signed agreement expediting the acquisition acknowledges that HMC has been operating at a loss for months. It states that the hospital has “consistently” operated at a loss of $1 million a month, with accounts payable in arrears exceeding 90 days. These losses compelled representatives of Habersham County to reach out to the Hall County Authority and ask them to exercise its option to purchase the hospital earlier than originally planned. The new contract closing date will be on or before July 1, 2023.

In agreeing to the expedited timeline, Habersham County commissioners also agreed to extend an additional $4.5 million line of credit to HMC to cover current operating expenses. This is in addition to an already spent $1.5 million line of credit commissioners granted the hospital on December 19.

The money for the credit line comes from Habersham’s portion of the American Recovery Act, which the county had hoped to use for other projects.

At Tuesday’s meeting, Habersham County Commissioner Bruce Harkness explained that under the terms of the Option to Buy Agreement, the county would have to put $2 million in escrow for seven years, “which we couldn’t touch.”

“They (NGHS) are going to give us credit for that $2 million as well. So that is $3.5 million credit against the $6 million,” he explained. “So actually, we are only going to have to come up with [an additional] $2.5 million. My understanding is that we have another $5 million left in the ARP federal funds that’s going to take care of that.”

There is nothing in the contract requiring the hospital and its soon to be owners to pay back those funds.

At the December 19 county commission meeting, Harkness asked Williams about a repayment plan for the initial $1.5 million dollar line of credit the county extended to the hospital. The hospital CEO said, “We can work on getting one of those for you.”

In less than a month, that money was spent with no plan for how to repay it.

The expedited sale agreement includes no provisions for repayment of the $6 million line of credit.

More money may be needed

In June 2022, Habersham County received approximately $8.8 million in ARP funds from the federal government. At that time, it was anticipated that some of those funds could be used to facilitate the construction of capital projects in SPLOST that would have budget shortfalls due to inflation in construction costs and supply chain shortages. In a special called meeting on December 1, the county commission approved using ARP funds for a hangar expansion project at the county airport to the tune of $3.4 million. That project has reportedly been pulled back and the money redirected to the hospital.

Over the past 2.5 years, HMC has received federal funds in the amount of $22.6 million. During the pandemic in 2020, the hospital received $19.7 million in CARES Act federal funds. In November 2021, the hospital received $2.9 million in ARP federal funds. No federal funds were received in 2022.

Hospital officials say that money, too, has been spent.

Will the $6 million line of credit be enough to sustain HMC in the short term? It’s unlikely, and the expedtire agreement addresses that.

There is a provision within the agreement that recognizes sustaining HMC will most likely require more than $6 million during this transition period. Both parties agreed to meet and confer regarding what each party can do should that amount be insufficient to maintain the hospital’s financial and operational stability.

NGHS will be overseeing those finances. Habersham County entered into a Management Services Agreement with NGHS for the transition period. NGHS will provide operational and financial oversight for the hospital until the contract closing date, including the spending of the line of credit approved by the Habersham County Commission.

What about HMC employees?

Another major concern for many has been whether HMC employees will keep their jobs. The new contract does not provide any assurances on that either, only to say that during the transition period, NGHS agrees to negotiate in good faith with key employees.

Key employees may be offered a short-term services contract that may be subject to a mutually agreed upon extension.

For employees outside key positions, the contract provides that NGHS will offer employment to employees that meet the following criteria as of the contract closing date.

  1. Meets all of NGHS’ employment qualifications.
  2. Meets all federal and state laws governing hiring employees.
  3. Apply online for their position and pass a pre-employment drug test, background check, interview, and physical exam.
  4. Is not listed as an Excluded Individuals/Entities of the Office of Inspector General of the U.S. Department of Health and Human Services.

Only time will tell since contracts don’t

Habersham Medical Center will be the second hospital in the area to be acquired by Northeast Georgia Health System. The health system acquired Chestatee Regional Hospital in Dahlonega in March 2018. That hospital closed in July 2018 and reopened a year later as Northeast Georgia Medical Center Lumpkin.

As Habersham County prepares to hand over the keys to its 70-year-old hospital, it does so without the comfort or certainty of what the future holds.

After Tuesday night’s meeting, Palmer tried to alleviate some concerns by offering his interpretation NGHS strategy.

NGHS looks at HMC as part of its health network, with its Gainesville hospital being the hub, said Palmer. Braselton, Winder, Lumpkin, and Habersham are the “spokes” in the health system’s service delivery area.

Palmer said Habersham would be used to facilitate medical services for Banks, Stephens, Rabun, White, and Franklin Counties. He also explained that NGHS currently needs the bed space for patients and “does not see HMC closing any time soon.”

Burrell alluded to the health system’s long-term plans for HMC and so did John Kueven. In his role as president of Northeast Georgia Medical Center Gainesville, Kueven has oversight of NGHS’ other hospitals in Lumpkin, and Barrow counties. He said NGHS is committed to make more “long-term, multimillion dollar reinvestments in infrastructure improvements for HMC in the coming years – at no cost to the county or taxpayers.” He added it is “our shared vision to better coordinate care – so people can get most of their routine, specialty, and hospital care without leaving Habersham County.”

That is the vision and hope tens of thousands of Habersham Countians are relying on, but without contractual assurances, only time will tell what the future holds for HMC.

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