County leaders to weigh changes to letter of intent

Changes proposed by University Health Systems of Eastern Carolina to its agreement with Beaufort Regional Health System and the effects of those change on the agreement’s bottom line are expected to be discussed Monday at a meeting of the Beaufort County Board of Commissioners.

One county commissioner said Friday he is not happy with those changes.

The revised agreement “is nowhere near what we started out with,” said Commissioner Hood Richardson. “Every change they made is of concern to us.”

Richardson, who also serves on the BRHS Board of Commissioners, is scheduled to update the county board on the negotiations between UHS and the BRHS board.

The commissioners also are scheduled to meet behind closed doors with their lawyers at Monday’s meeting. During that closed-door session, they will likely discuss the implications of the agreement changes proposed by UHS, Richardson said.

“This is what happens when you drive away all of the competition,” he said. “We have two choices č to fight it or take it. I don’t know where the commissioners are on this, but I’d tell (UHS) to stuff it.”

On Jan. 31, BRHS board Chairwoman Alice Mills Sadler, on behalf of the BRHS board, first signed a letter of intent with UHS, allowing UHS to move forward with its inspection of the financial records and operations at BRHS – a process known as “due diligence.” The 11-page letter and attached summary of transaction terms also were signed by Dave C. McRae, chief executive officer of UHS.

A revised letter of intent and summary of transaction terms between UHS and BRHS were presented to the BRHS board at its meeting last week.

The new document included a reduction in the offer by UHS for the 30-year lease-purchase agreement for BRHS from $30 million to $25 million. UHS also moved forward the deadline for negotiations from April 29 to May 31.

The amended letter of intent also reduced the $10 million that UHS initially offered for the purchase of the BRHS property at the end of 30 years by “the amount of any Excluded Liabilities paid by UHS on BRHS or its affiliates behalf.”

There are 10 such liabilities listed in the amended letter. They include those associated with taxes, contracts not assumed by UHS, environmental hazards associated with underground storage tanks and asbestos exposure, issues related to employee grievances or terminations, among others.

The new letter also stipulates that UHS will reserve the right “to require a portion of the prepaid lease payment to be placed in an escrow account for a reasonable period to be used by BRHS or its affiliates to pay any Excluded Liability.”

The lease-purchase offer from UHS originally included the promise of “a minimum of $21 million in capital expenditures” in the first five years of the lease and listed four priorities including conversion at BRHS to a system of electronic medical records, emergency department expansion and renovation, patient room renovation, expansion and renovation of the Marion L. Shepard Cancer Center and “annual normal capital expenditures.”

The new letter also includes a provision for “asbestos abatement and removal” among those capital improvements.

Asbestos is a mineral fiber that was commonly used in a variety of building construction materials for insulation and as a fire retardant.

As was typical with buildings constructed before 1970, some asbestos was used as a fire-proofing material on the roof of the Beaufort Regional Medical Center, according to Pam Shadle.

“This asbestos is contained and limited and does not create a safety issue in its current state, but it might have to be addressed in the event of future renovations or construction to the buildings,” Shadle said.

During its meeting last week, the BRHS board voted to ask UHS for an additional $500,000 to cover any unanticipated payments due by BRHS that result from contracts currently in force with the local health-care system.

BRHS also will ask UHS to share with BRHS any accounts receivables – or payments due BRHS – that are recovered in addition to those identified in the audit of the health system’s 2009-2010 financial statements.

In January, the BRHS board voted to accept the lease-purchase offer from UHS, but the ultimate decision to accept or reject the offer lies with the county commissioners.