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Round Two in Greenwood Leflore Hospital RFP for lease or sale

Monday, August 21, 2023, 3:45 pm News Flash Archive

After many months, the city of Greenwood and Leflore County have finally approved for advertisement a second round of Request for Proposals, this time for the sale or lease of the Greenwood Leflore Hospital. The city and county are joint owners of the hospital, so both must act together in hospital-related matters.

Last summer, an RFP was approved and advertised for the lease of the hospital, but it attracted only one response, from University of Mississippi Medical Center (UMMC).

The Taxpayers Channel had reported numerous possible "deal breakers" in the RFP, including many "mandatory" terms which no sensible bidder would likely accept.

While UMMC's offer was kept secret from the public, last January, The Taxpayers Channel obtained a copy and published it in full.

As we reported, the "deal breakers" were clearly outlined in UMMC's bid, which firmly rejected most of them:

no job guarantees for any current employees
a short term 10 year lease only
no assumption of hospital debts and liabilities
no coverage for current pension plan underfunding
no liability indemnity for city, county, or hospital officials
only trivial rental payments
no promises to continue to provide specific medical services
no proposed improvements or new service lines

To view our reporting on the failure of the summer 2022 RFP, see here: UMMC Response to Greenwood Leflore Hospital Lease RFP finally revealed

UMMC withdrew from negotiations on November 4, 2022, exactly one week after the Leflore County Board of Supervisors refused to authorize an Irrevocable Letter of Credit for $4.5 million payable to UMMC to cover the cost of deferred maintenance and the Medicare short-term loan owed by the hospital. Instead, three of the county supervisors expressed their intention to condition the $4.5 million on UMMC first agreeing to guarantee certain medical services, which unbeknownst to the public at large, UMMC had already refused to do.

This month's RFP would allow bidders to make offers either to lease the hospital as before, or to purchase it outright. The Taxpayers Channel first published this latest RFP by the city and county here: 2023 RFP for Greenwood Leflore Hospital

The city and county both adopted similar resolutions authorizing the advertisement of the latest RFP. Leflore County, for example, described the purpose of the RFP as follows:

RESOLVED, that the Board of Supervisors of Leflore County, Mississippi, finds that Publication of a Notice of the Request for Proposals in order to obtain binding proposals will enable the Board of Supervisors to decide whether any proposed sale or lease with or without purchase option of the Greenwood Leflore Hospital will be in the best interest of the County and protect the community's health interests and will meet the objectives of maximizing the value of the existing Hospital through obligations of a Bidder to improve the regional reputation of the Hospital and to make capital improvements in the hospital facilities, to make investments in the local workforce and to expand hospital and professional healthcare services by working with and expanding the Medical Staff so as to provide the highest quality medical care at the lowest reasonable cost to the residents of the County, City and the Hospital's service area.

Many of the "deal breakers" are still included in the new RFP, but have been watered down somewhat to make them more negotiable.

First off, the RFP contains secret exhibits that the public is not allowed to view:

Bidders that submit a notice of intent to bid per V.C.3 below will be entitled to receive or obtain access to Exhibits 3-14 following execution and return of the Proprietary Information and Non-Disclosure Agreement in the form of Exhibit 2. More detailed due diligence, including on-site interviews and visits to the Hospital's campus will be reserved for only those Bidders that actually submit a binding bid meeting the minimum bidder and bid qualifications set forth in Part I.A below.

The bids will be judged by the city and county as follows:

Bids will be evaluated based on the overall assessment of the Bidder qualifications, ability to meet County and City objectives, proposed exceptions to the minimum terms described herein and the value of the purchase or lease terms offered. To the extent the County and City have questions regarding bids or the willingness of a Bidder to withdraw certain of its exceptions, the County and City may engage in negotiations and discussions with all or any of the Bidders as the County and City determine in their sole and joint discretion. Following any such negotiations and unless there is a petition filed with the City or County requiring a public election on the matter as authorized pursuant to the Code and upon approval of the proposed lease (if applicable) by the Hospital's Board of Commissioners, the County and City will announce the "highest and best" Bidder and then will subsequently negotiate and sign either a lease ("Lease") or asset purchase and sale agreement ("APSA") with such successful Bidder or the City and County may reject any and all bids for any reason.

The bids are all due on or before 3:00 p.m., October 13, 2023.

According to the new RFP:

Determination as to whether to sell or lease or to continue existing operations of the Hospital is scheduled for no later than November 15, 2023. . . .

The closing date for any deal is set for December 31, 2023.

Additional conditions required for the bidder by the new RFP include:

At least ten (10) years operational experience of licensed hospitals by the proposed Lessee or Purchaser submitting the proposal

A net worth of at least $75,000,000.00 or submit other proof of adequate financial resources available to the prospective Purchaser or Lessee to purchase or lease, as applicable, and operate the purchased or leased assets . . . .

Demonstration or certification the prospective Purchaser or Lessee will agree to guarantee the provision of the following level of services following the Closing, at a minimum: continuation of charity care no less than current levels; continuation of general acute care beds, rehabilitation, surgery and emergency room services as currently offered, unless the County and City agree to a reduction in services.

Explain how currently offered specialty services will continue to be available to residents of the service area, and recruitment efforts that will be undertaken by the Bidder to recruit and retain these specialists in the County and City

Commitment to make capital improvements to the purchase or leased assets of at least $10,000,000 Million over five (5) years from the Closing

Annual or monthly rent payments for real property and tangible property

In the case of the UMMC bid offer the last time, the rent payments proposed by UMMC were merely the premium cost of the property insurance, which the city and county would be required to maintain. In other words, there was no net money to be paid to the city and county for the lease.

In the new RFP, the city and county expect the bidders to provide liability coverage for any "prior acts," with the city and county refusing to pay premiums to maintain liability coverage.

The new RFP, like the old one, also demands that:

The prospective Lessee or Purchase should agree to indemnify and to hold the City, City officials, County, the members of the Board of Supervisors and other County officials and the Hospital Board members and the County's and City's respective officers, employees and agents harmless from and against any and all liability arising in connection with the operation of the leased assets by the Lessee or Purchase from and after the date of Closing. In the alternative, Bidder may explain any exception or explain any alternative claims escrow or insurance that will be provided at the Bidder's cost to assure equivalent protection. Each Bidder should also acknowledge that the City and County do not have statutory or constitutional authority to providing binding reciprocal indemnification.

Last year, UMMC categorically refused to offer any such coverage at all, and claimed it was unlawful to do so.

The latest RFP also requires that the bidders specify the "method of financing for planned expansion or renovations listed in item B.6 above, including relevant terms, conditions and rating (if applicable)."

Another requirement imposed by the new RFP on the successful bidder is:

. . . that the transition period from the signing of the Lease or APSA [purchase agreement] until hospital operations commence by the Lessee or Purchaser upon Closing will occur without any interruption of service for hospital patients or any undue interference or disruption of the practice of medicine by Hospital's Medical Staff.

The County and City intend for the successful Bidder to assume additional purchase orders for supplies and goods that are not specifically itemized but are routinely issued by the Hospital in accordance with applicable public purchase laws and in the Hospital's normal course of business, including without limitation, contracts and purchase orders issued during the transition period between execution of the Lease or APSA [purchase agreement] and the Closing.

In addition, the city and county require the bidders to specify all the contracts, which are not available for public review, that the bidders will terminate and no longer honor. These contracts include contracts with physicians, other providers, and other vendors.

The new RFP requires that the bidders agree to keep the current patient services operational, and also to:

outline or summarize its short and long range recommendations with respect to strategic issues, competitive assessments, service growth, physician mix and recruitment, facility and equipment upgrades, and its ability to expand or enhance hospital and professional physician services to be made available to citizens by the Hospital following the proposed sale or lease.

The city and county want to require that the bidders agree to maintain physician contracts and employment of other workers:

The County and City also desire to maximize opportunities for its medical staff and its workforce.

In addition to the assumption of written key contracts with physicians and physician groups as listed on Exhibit 8 [a secret document kept from the public], it is the specific desire of the County and City that currently offered services remain available to the community and that all Hospital employees who are not subject to written contracts be offered continued employment from the Closing of the lease or sale on terms substantially equivalent or better than current salary and benefit programs.

Bidders should address their ability or intention to meet the desire of the County and City.

Each Bidder should indicate its willingness to continue to offer employment to those employees of the Hospital on the Closing for at least 12 months from the Closing at terms of employment equal to or better than currently in effect or such longer period as may be contained in any written physician contract listed on Exhibit 8.

Termination for "cause" during such 12 months or longer continuation term shall be allowed in the Lessee's or Purchaser's discretion. To the extent possible transferred employees generally should be given credit for all prior service with Hospital with respect to benefit plans provided by Lessee, except as otherwise explained in the bid and agreed by the County and City.

A summary comparison of Hospital's current benefit plans with the benefit plans to be offered by the Lessee or Purchaser should be included with each bid.

The city and county require the bidders to specify how much money they will commit to spending to improve services:

Each Bidder should propose what capital and service line improvements it will commit to finance and implement and the time table for these enhancements.

The new RFP requires the bidders to specify what damages they will be liable for should they fail to continue the services and charity care obligations proposed in the bids:

For an APSA [purchase agreement], Bidders should provide a price and proposed payment terms and explain what contractual remedies will be offered to the County and City in the event of a post-Closing default in the continuing service and charity care obligations to be undertaken by the Bidder. For the Lease, the rent terms must be described and remedies for material default under a proposed Lease must include the right of the City and County to terminate the Lease and have a reversion of the Hospital license, certificate of need and other assets.

Once again, this new RFP requires the bidders to specify:

whether it intends to assume the Hospital's existing, disclosed debts and its lease obligations, including the Hospital's unfunded pension liability as described in the actuarial report in Exhibit 13.

The most recent actuarial report of the pension fund states that it is underfunded by $18 million. In last summer's RFP, UMMC refused to assume any hospital debt or any responsibility for making the pension fund whole. Right now, the hospital owes Medicare over $4 million for a short-term loan made by CMS to the hospital.

Given the conditions imposed by the city and county's RFP, it will be interesting to see if any bidders make proposals at all.

According to hospital administration officials, if the hospital's application for critical access designation is denied by CMS, the hospital will have to close. This RFP is being pursued as a "back up plan" if the hospital cannot survive on its own.

In 2012, the city and county considered the lease or sale of the hospital, after Horne LLP issued a dire report about the hospital's future. After a huge public hearing was held at the Civic Center, the city rejected the RFP proposal outright. To see our coverage of that hearing, view here:

Hospital Report Released

Video posted of Hospital Sale hearing

City Council rejects Hospital sale RFP

By contrast, the public hearings held August 7 and 8 this year were pro forma, and there was essentially no participation from the public at all. The city's hearing lasted less than four minutes, and no questions were asked or statements made by anyone from the public during the hearing. To view that hearing, see here: Hearing on Hospital sale or lease

To review our reporting on GLH and its financial woes, please see here: Index of Greenwood Leflore Hospital news articles

John Pittman Hey
The Taxpayers Channel

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