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Tennessee company to purchase Highland Hospital

CHRIS DORST | Gazette -Mail file photo
Highland has been struggling the pay the debts incurred when building the new hospital in Kanawha City. The company announced Monday it plans to sell the hospital and two other mental health providers to a Tennessee-based company.
F. BRIAN FERGUSON | Gazette-Mail
Highland Hospital CEO Cynthia Persily

The parent company of Highland Hospital plans to sell the psychiatric hospital, Highland Health Center and Process Strategies to Meridian Behavioral Health Systems, the company announced Monday.

The board of directors for HHA Inc., Highland’s parent company, unanimously approved a definitive agreement to sell Highland to the Brentwood, Tennessee-based company, on Aug. 11, but the companies still must complete regulatory filings and prepare legal documents, according to Cynthia Persily, CEO.

Persily said they began looking for a buyer in March 2016. The companies hope to complete the transaction by the end of September.

Hospital officials pointed to “the Affordable Care Act, the expansion of managed care in West Virginia Medicaid and the downturn in West Virginia’s economy.”

Medicaid made up 57 percent of the company’s payor mix in 2015, according to background materials.

“The health care industry goes the way of the economic situation of the state,” Persily said.

The agreement includes the sale of: Highland Hospital Association, a psychiatric hospital with 80 acute-care beds for adults, children and adolescents and a 24-bed psychiatric residential treatment facility for children and adolescents; Highland Health Center, Inc., a 16-bed residential treatment and detoxification program; and Process Strategies, an outpatient provider with integrated behavioral health care and pharmacy services.

Hospital officials also said that “the companies are suffering from a 9.125 [percent] interest rate on the bond debt from construction of the new hospital facility.”

Highland Hospital borrowed $29 million of tax-exempt debt to build a new 73,000-square-foot hospital next to the old hospital in Kanawha City. Construction began in 2011 and the new building opened in June 2012.

“Things were very different at the time when we sold those bonds in 2011,” Persily said.

She also said they had projected more patient diversions from state hospitals.

“It’s a perfect storm of a lot of things,” she said.

The company will be sold for the cost to pay off the bonds and accrued interest, as of the date of settlement.

Persily declined to provide a copy of the 450-page agreement.

“It’s not public,” she said. “It’s proprietary. It’s about 450 pages long.”

Persily said they plan to apply for an exemption of Certificate of Need from the state Health Care Authority. She said they should meet the requirements because they are both a behavioral health facility and a new state law allows them to apply as “financially distressed hospital.”

The company employs about 380 full-time workers.

Under the terms of the agreement, all employees will be offered positions, Persily said.

Currently, Persily and other employees report to a nonprofit board made up of local people. Assuming the sale goes through, they will report to the CEO of the Tennessee-based company, who does not live here.

“But it will be managed by those of us who do,” Persily said.

She said the company also plans to create an advisory board that will be made up of local people.

Meridian is considering making use of the currently unused fourth floor of the new hospital, as well as space near Process Strategies for outpatient eating disorder treatment, Persily said.

Persily said “there is a world of possibilities out there.”

“The changes are related to growth,” she said.

Highland announced in August 2016 that Acadia had signed a letter of intent to purchase the company. Persily said in November 2016 that it was no longer “the right deal at the right time.”

“When you sign a letter of intent, that’s kind of the engagement,” she said. “The definitive agreement is the marriage certificate. The settlement is the wedding.”

Highland Hospital typically operates at about 75 percent capacity, according to Persily. Highland Health Center operates at about 90 percent occupancy, and Process Strategies has a waiting list, she said.

According to the company’s website, “Meridian Behavioral Health Systems is a fully integrated behavioral health company formed in 2012 by experienced hospital operators and healthcare investors to assist communities with the current general shortage of psychiatric and behavioral health beds in the United States.”

Highland-Clarksburg Hospital Inc., is not included in the sale. It is a stand-alone corporation and not an affiliate of Highland, a news release states.

Reach Erin Beck at erin.beck@wvgazettemail.com, 304-348-5163, Facebook.com/erinbeckwv, or follow @erinbeckwv on Twitter.

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