Just days after launching a surprise effort to buy Southern Regional Medical Center, Grady announced Tuesday that it has called off its bid for...

Just days after launching a surprise effort to buy Southern Regional Medical Center, Grady announced Tuesday that it has called off its bid for the struggling Clayton County hospital.

Southern Regional Medical Center

Southern Regional Medical Center

Grady Health System officials cited a tight time frame, mandated by a bankruptcy court, in their decision to back away from pursuing Southern Regional.

The decision by Grady’s corporate board means, in all likelihood, that the Riverdale hospital and its assets will go to California-based Prime Healthcare Foundation, which has offered $18 million. The bankruptcy court still needs to approve the sale to Prime at a hearing Thursday.

Grady made its bid Sept. 25, just before a deadline, with a proposal that was valued at $20.5 million.

“Grady was not originally invited to participate in the acquisition process before Southern Regional’s bankruptcy filing,’’ said Grady Health System CEO John Haupert in a statement Tuesday. “It was only very late in the process that Grady was made aware of the opportunity to participate.’’

“This compressed time frame set by the bankruptcy court meant that we were still receiving documents as late as last night from the debtors counsel,” Haupert said Tuesday. “While Grady fully understands the importance of a community asset like Southern Regional, the impact of the limited time frame and the fact we were unable to reach out to all the various community leaders that have supported Grady’s mission and made Grady’s turnaround possible impair our ability to bid responsibly.”

The Grady proposal had set up a bidding war with Prime for the 331-bed Clayton County hospital and related assets, with an auction scheduled for Wednesday.

Prime signed a letter of intent in July to purchase Southern Regional, and that agreement was followed by the owner of the hospital filing for Chapter 11 reorganization in U.S. Bankruptcy Court.

Grady needed approval by its corporate board for its bid on the Riverdale hospital to go to auction. The board was set to vote Tuesday, but that meeting was called off, and Grady shortly thereafter issued its statement on not pursuing the deal.

Southern Regional Health System said in a statement Tuesday that its board will meet Wednesday to review and vote on the acceptance of Prime’s bid. “Prime Healthcare has expressed an ongoing commitment to acquire Southern Regional Medical Center and to provide quality health care to the citizens of Clayton County,” the statement said.

Grady Memorial Hospital

Grady Memorial Hospital

News of Grady’s proposal last week startled many in the hospital industry, mainly because the Atlanta safety-net system had its own history of financial struggles. Yet Grady has made a remarkable comeback in recent years, thanks to major foundation investments and improved financial practices. That was the “turnaround” mentioned by Haupert in his statement Tuesday.

Haupert told Georgia Health News last week that the hospital viewed the purchase of Southern Regional as an investment, which would be paid for with “cash on hand.’’

“Within the first year, [the purchase price] will be returned,’’ Haupert said. He added that savings would come from better financial management at Southern Regional and from improved billing and collections.

Prime Healthcare Foundation had pledged to maintain Southern Regional as an acute care hospital, offering emergency services among others, for at least five years.

In addition, the nonprofit foundation has agreed to invest $50 million in capital improvements at Southern Regional over the next five years. It also has agreed to hire “substantially all employees currently at the hospital”; to maintain charity care at or above existing levels; to maintain a local governing board and independent medical staff; and to spend at least $1 million in new physician recruitment.

Grady’s bid, according to court documents, was $2.5 million more than Prime’s. “We believe we matched Prime’s bid in every way and exceeded it,’’ Tim Jefferson, Grady’s chief counsel, said last week.

Haupert had emphasized that tax money allotted to Grady from Fulton and DeKalb counties would not go to the potential purchase of the Clayton County facility or to its operation.

“The dollars that Fulton and DeKalb contribute are 100 percent locked into [providing]  primary care to [uninsured] patients in those counties,” he said last week.

Southern Regional, the only hospital in Clayton County, is saddled with a heavy load of uncompensated care and has been in danger of closing its doors. It has posted annual financial losses since 2007.

Several years ago, Grady itself was in danger of closing, having trouble making payroll and paying bills. But the positive trend in recent years is reflected in Grady’s net income of $34 million in its 2014 fiscal year.

If Prime Healthcare’s bid is approved, Southern Regional will be Prime’s first hospital in Georgia. The foundation and Prime Healthcare Services are known for buying distressed hospitals and turning them around financially.

Haupert said in his statement that Grady officials “very much appreciate the hard work of the many people and institutions that we collaborated with, including members of the Clayton County Board of Commissioners and its staff, the Clayton County Hospital Authority, Southern Regional Medical Center, and many others.”


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Andy Miller

Andy Miller is editor and CEO of Georgia Health News

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