News at War Memorial Hospital

Commission votes 2-1 to sell hospital - by Kate Evans - 12/17/2008 - reprinted from The Morgan Messenger

The Morgan County Commissioners voted 2-1 to sell Morgan County War Memorial Hospital to Valley Health Systems for $2,750,000 in cash plus other benefits.

The action came late in the commission meeting on Friday, December 12.

Commissioner Tommy Swaim and Commissioner Brenda Hutchinson favored the hospital sale while Commissioner Glen Stotler voted against it.

When bids were sought this summer, Valley Health Systems of Winchester, Va. was the only company interested in buying the county-owned hospital business.

The sale includes only the business of operating the hospital and its equipment and assets, not the building or the land, Commissioner Stotler said.

The county will receive $1.5 million in cash up front and the remaining $1.25 million in 24 monthly payments of $52,100, Commissioner Swaim said.

In addition, Valley Health will rent the present hospital building for $5,000 a month until a new hospital can be built.

As part of the agreement, Valley Health will build a new hospital within two years from the date that a Certificate of Need is approved by the state.

If the new hospital is not built in two years, Valley Health will continue the $52,100 monthly payment for a third year.

Valley Health must file for a Certificate of Need to operate the present hospital as well as a separate Certificate of Need to build a new hospital. The new facility is estimated to cost about $30 million.

The agreement is contingent on Valley Health acquiring both certificates.

Other terms

The commissioners will retain five acres of the 80.5 acres of the new hospital site on Fairview Drive to use for public purposes at their discretion, Swaim said.

The county will also retain seven acres of Berkeley Springs Internal Medicine property on Gayle Drive and the office building there, Swaim said.

The county will keep the old hospital building and the nine acres of land, he said.

The hospital-run Hancock medical practice will also be acquired by Valley Health.

Keeping existing hospital employees was included in negotiation discussions. Valley Health later announced that no changes in staffing were expected.

Valley Health will assume all assets and liabilities for War Memorial Hospital.

Swaim said the hospital has $1.8 million in liabilities, including $1,458,600 for the land for the new hospital site as well as the purchase of a new digital mammogram machine and other equipment.

Valley Health will continue to provide $2.2 million in liability insurance during the lease period while the new hospital is being built.

Wanted new hospital

Swaim said he voted to approve the hospital sale because he was concerned that the county would end up without a new hospital.

There were no other bidders and it was Valley Health’s final offer, he said. They had advertised the hospital sale extensively from Virginia to Pittsburgh.

A 2003 study said $1.5 million was needed to upgrade the present building, Swaim said.

The hospital is also spending $7,293 a month in interest payments for the new hospital property and $987,000 has already been spent for architect and engineering plans, he said. That money would be wasted if they stopped the plans for the new hospital.

Swaim didn’t think Valley Health would have co-signed a loan to build a new hospital if the county hadn’t agreed to sell them the business.

“I would like to see more money, but I felt we had to sell,” Swaim said.

Worth more

Stotler was not in favor of the hospital sale. He felt it wasn’t a good deal and that the hospital was worth at least as much as the $5.5 million price that Hampshire County Hospital brought when it was sold in September 2007. That hospital had few cash assets while War Memorial Hospital had $1.75 million in cash surplus, Stotler said.

He felt it was to the county’s disadvantage that the sale of War Memorial Hospital had to be publicly bid since it was a public entity. Valley Health knew they were the only bidder.

“There is not the incentive to bid a whole lot when you know that,” Stotler said.

With the cash surplus and the design and engineering fees already spent, Stotler thought they were giving the hospital away.

“I think the asset is worth a whole lot more than we’re getting,” Stotler said.

But, he said, he couldn’t ignore that Valley Health will build a new hospital. Stotler added that he wasn’t critical of Valley Health Systems and called them a “first class operation.”

Tough decision

Commissioner Hutchinson said it was a difficult decision to sell the hospital. The commission had expected more in cash. But with the state of the economy, she was concerned that if they waited and let the bid from Valley Health lapse, there may have been no takers.

Hutchinson was surprised that West Virginia University Health Systems didn’t put in a bid. She said she would have liked to have kept health care dollars in state.

At least now the county is assured of getting a new hospital, she said.

Hospital reaction

Hospital Administrator John Borg and Vice President of Operations Neil McLaughlin issued a statement saying:

“The administration and staff are very happy and feel it will help keep their jobs secure, help sustain economic growth of the county and keep access to quality health care for residents and visitors to Morgan County.”

“The prospect of a new hospital is exciting for our patients, and when construction begins, will benefit the economy of Morgan County,” Borg said.

It will take at least three to six months for Valley Health Systems to obtain the license to operate the hospital and much longer to get the Certificate of Need to build the new hospital, McLaughlin said.

They have the Certificate of Need document largely prepared, but it will have to be redone for Valley Health making the application to build the new hospital instead of the county, he said.