HCHD Agrees To Sell 49% Interest In CHRISTUS Hopkins Health Alliance
Sulphur Springs — CHRISTUS Health and the Hopkins County Hospital District announced the unanimous approval of a Letter of Intent for the District to sell its remaining interest in CHRISTUS Hopkins Health Alliance joint venture to CHRISTUS Health Thursday afternoon, Dec. 17. Final negotiations for the deal are in progress.
In July of 2016, the Hopkins County Hospital District entered into a binding agreement with CHRISTUS Health to form a joint venture known as CHRISTUS Hopkins Health Alliance. The Alliance is jointly owned by CHRISTUS Health and the District.
The letter of intent and its approval is the result of many months of negotiations between CHRISTUS and HCHD.
CHRISTUS Health, in the letter of intent, offers to pay $27 million for the Hospital District’s 49 percent interest in CHHA, Kerry Law, president of the Hospital District Board of Directors, said upon returning from an executive session, which the HCHD board entered into to consult with the board’s attorney and discuss the matter in a closed session.
The funds from the sale will be used to retire the outstanding bond debt of Hopkins County Hospital District. In addition, the District will retain ownership of the real estate and facilities, which will be leased to CHRISTUS Health,, stated a press release from William Knous, CHRISTUS Health-Northeast Texas/Louisiana Manager Media/Public Relations.
“A portion of that will be paid with the lease deposit CHRISTUS has with the district up to $3 million, and CHRISTUS will also release a special identified liabilities reserve fund that they have held since the July 2016 transaction that is approximately 1.4 million. The district and Alliance will end the lease agreement to a revised lease agreement of $1 million,” Law noted.
CHRISTUS has been paying $5-6 million in lease agreements, but the letter of intent proposes paying $27 million up front to buy out HCHD’s 49% and $1 million in rent.
A third party analysis at CHRISTUS’ cost has been ordered to determine that the payments are all at fair value,, HCHD Board member Joe Bob Burgin and Law noted.
The Hopkins County Hospital District will continue to proved indigent care financial support to the hospital and will continue to own and operate the District’s EMS service. The agreement stipulates that Hopkins County EMS will continue serve as exclusive provider of EMS services to Hopkins, Rains, Franklin and Delta counties, during the lease term as long as those counties agree, including serving as the primary local EMS provider for CHRISTUS.
Under an indigent care agreement, the Hospital District will pay up to $2 million annually to the Alliance for the cost of providing indigent care for Hopkins County indigent patients, with that maximum increasing to 2.5 million after 5 years and $3 million after 10 years of the hospital property being leased from the Hospital District, with the time period beginning after closing of the deal.
“We are committed to bringing the best patient care and services to the communities we serve. This has been an integral part of our mission as a faith-based health provider, and we will continue to realize that vision for Northeast Texas for years to come,” said Paul Harvey, Chief Executive Officer, CHRISTUS Mother Frances Hospital – Sulphur Springs. “We will not only continue to serve the people of this region diligently, but grow to expand access to the high-quality health care as Northeast Texans have come to expect.”
CHRISTUS has further committed to invest additional funds in Hopkins County, including capital improvement projects, boosting information technology and championing physician recruitment over the next 5 years, the CHRISTUS press release stated. According to the HCHD president, CHRISTUS is committing to investing $5 million within 5 years of the closing.
“The relationship between the District and CHRISTUS Health has been very successful and has allowed the hospital to improve quality and expand services to the residents of Hopkins County,” said Law. “CHRISTUS has been a valued partner in the Sulphur Springs community, and the District believes this agreement will serve as the basis for a long and successful relationship between the District and CHRISTUS for the operation of CHRISTUS Mother Frances Hospital – Sulphur Springs for many years to come.”
The Hopkins County Health Care Foundation bylaws will be amended to limit purpose of the foundation to support activities and purposes of the Alliance and the hospital.
The newly announced transaction is subject to final negotiation of the binding agreements, and the parties would expect the matter to close within the next 90 days, according to the CHRISTUS press release. That’d be approximately March 31, 2021.
Burgin made the motion at the Dec. 17, 2020, meeting to approved the letter of intent, authorizing HCHD’s legal council, Kevin Reed with Reed, Claymon, Meeker and Hargett of Austin to finalize negotiations, and allow Law and CEO Ron Folwell to sign the documentation necessary to execute on LOI for the transaction. The motion was seconded by HCHD Board member Tim Kelty, who was also administered the oath of office to continue serving on the board; he was unopposed for reelection to the HCHD Board, but has not been able to be at meetings following the election until the Dec. 17 meeting.
The board unanimously approved execution of a letter of intent with CHRISTUS regarding the potential sale of the Hospital District’s interest in CHRISTUS Hopkins Health Alliance and an associated lease agreement, pending finalizations of negotiations.
“I think this is a historic day in health care in Hopkins County,” Burgin said.
Some of the questions board members said should be ironed out are what happens if the independent evaluation issues an opinion other than the offer from CHRISTUS and to include a periodic cost of living re-evaluation on the $1 million lease agreement.
Burgin said initially he didn’t think the CHHA 51/49 split was a good deal, but four years later can affirm it was a blessing to the Hospital District in what the district got out of the partnership.
“We are very blessed to have CHRISTUS in our community, absolutely blessed to have them operating our local hospital and Paul [Harvey] has done a great job as administrator,” Law said following the vote.
Harvey credited the partnership between CHRISTUS and the Hospital District and expressed appreciation especially to Folwell and Law for their willingness to sit down and discuss the possibility for the agreement.
After the meeting, Law clarified Hopkins County Hospital District is still a taxing entity. HCHD still owns all of the hospital buildings and land, and would continue to do so under the agreement giving CHRISTUS HCHD’s 49 percent interest in the Alliance. CHRISTUS will continue leasing the property from the Hospital District and managing all hospital and health care operations within those leased facilities. The term left on the current lease, with all renewals, is about 40 years the HCHD president noted,
HCHD will also continue using intergovernmental transfers (IGTs) as has been done over the past four years for transfer of amounts approximately equal to the lease payments received for the property use for indigent care. The agreement will allow HCHD to be debt free, Law said.
Law said HCHD after paying off all bond indebtedness will continue to evaluate the hospital district finances and outflows, to see if the current tax rate is still appropriate. Then, next summer during the budget drafting process, that information will be considered when the hospital district sets the budget and tax rate for the 2021-2022 fiscal year. The tax rate, Law said, can’t be adjusted to them.
“We are still required to operate EMS locally,” Law noted. “We only collect about 30 cents on the dollar for every dollar we bill on EMS. So, you have to subsidize EMS so that’s another thing the tax revenues help with.”
Folwell said that’s where nursing homes owned the district owns in other cities come in handy.