HARDIN COUNTY FISCAL COURT ALSO ACTING IN ITS CAPACITY AS ...
HARDIN COUNTY FISCAL COURT ALSO ACTING IN ITS CAPACITY AS BOARD OF TRUSTEES FOR HARDIN MEMORIAL HOSPITAL
RESOLUTION NO. 2018-068
WHEREAS, pursuant to Resolution No. 2016-182, the Hardin County Fiscal Court (the "Fiscal Court"), also acting in its capacity as the Board of Trustees of Hardin Memorial Hospital, approved the issuance of a Request for Proposals ("RFP") to explore strategic partnership options from interested healthcare organizations for the future operation of Hardin Memorial Hospital, also known as Hardin Memorial Health ("HMH");
WHEREAS, pursuant to Resolution No. 2017-1, the Fiscal Court, also acting in its capacity as the Board of Trustees of HMH, selected the proposal submitted by Baptist Healthcare System, Inc. ("Baptist Health") and appointed and authorized a Steering Committee to negotiate a definitive agreement with Baptist Health (the "Definitive Agreement");
WHEREAS, pursuant to Resolution 2017-1, the Steering Committee was directed to submit the Definitive Agreement to the Board of Trustees of HMH for review and final approval prior to execution and implementation;
WHEREAS, the Definitive Agreement that the Steering Committee and Baptist Health have negotiated and drafted is an Asset Purchase Agreement, attached hereto as Exhibit A (the "APA"), pursuant to which Hardin County will sell and assign to Baptist Health the identified assets and liabilities, including certain real and personal property currently used by HMH and necessary to HMH's continued growth and success;
WHEREAS, on May 1, 2018, at an Executive Session of the Board of Trustees of HMH, the Steering Committee submitted the APA to the Board of Trustees along with a report, attached hereto as Exhibit B (the "Steering Committee Report"), which summarizes the terms of the APA, identifies several reasons why the execution of the APA is in the public interest, and recommends that the Board of Trustees of HMH approve the execution of the APA;
WHEREAS, on May 1, 2018, the APA and the Steering Committee Report were posted for public review; and
WHEREAS, the Fiscal Court, also acting in its capacity as the Board of Trustees of HMH, having had sufficient time to review the APA and the Steering Committee Report, desires to adopt the recommendations of the Steering Committee and the resolutions set forth herein;
NOW, THEREFORE, BE IT RESOLVED, that the Hardin County Fiscal Court, Commonwealth of Kentucky, also acting in its capacity as the Board of Trustees of HMH, hereby determines the following:
(1) The APA, which is incorporated herein by reference, fully describes the real and personal property of Hardin County, Kentucky that will be sold to Baptist Health (the "Property") and the amount of compensation Baptist Health will pay to Hardin County; and
(2) To the knowledge of the Fiscal Court, at the time the Property was acquired, its intended use was for the provision of, or for the future provision of, or to facilitate the provision of health care services to the residents of Hardin County and the surrounding region; and
(3) For each of the reasons set forth in the Steering Committee Report, which is incorporated herein by reference, and including without limitation the cash compensation to Hardin County, the continued operation of a nonprofit hospital in Hardin County, the continued employment of HMH's current physicians and staff, and the economic development benefits expected from Baptist Health's capital commitment, it is in the public interest to sell the Property to Baptist Health; and
(4) The method of disposition to be used to sell the Property will be the execution and delivery by the parties of the APA, the completion of the conditions and actions described in the APA to occur on or before the Closing (as defined in the APA), and the conducting and carrying out of the Closing and the other matters called for in the APA. This method of disposition is the culmination of a two year process authorized by the Fiscal Court which has included vetting 37 health systems, contacting 11 health systems to gauge their interest, issuing an RFP (as approved by Resolution No. 2016-182) to eight interested health systems, a competitive bidding process involving four health systems (submitting a total of three proposals) interested in
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purchasing the Property; selection of Baptist Health's proposal (pursuant to Resolution No. 2017-1); and negotiation of the APA.
BE IT FURTHER RESOLVED, the Fiscal Court hereby authorizes, ratifies, and approves the sale of the Property pursuant to the terms of the APA.
BE IT FURTHER RESOLVED, the Fiscal Court hereby authorizes and directs the Hardin County Judge Executive acting in his role as Chair of the Board of Trustees of HMH, or his designee, to execute the APA on behalf of Hardin County d/b/a HMH.
BE IT FINALLY RESOLVED, that, following the execution of the APA, the Fiscal Court hereby authorizes, empowers, and directs the Hardin County Judge Executive acting in his role as Chair of the Board of Trustees of HMH, or his designee, to enter into any other agreements and to take any and all actions necessary or appropriate to carry out, give effect to and consummate the sale of the Property, pursuant to the terms of the APA.
ADOPTED, by the Hardin County Fiscal Court, Commonwealth of Kentucky, also acting in its capacity as the Board of Trustees of HMH, in Regular Meeting of the Fiscal Court, on this 22nd day of May, 2018.
--:tfur y: z q
Hardin County Judge/Executive & Chair of the Board of Trustees of Hardin Memorial Hospital
Attest:
~ ?ha Debbie Donnelly Hardin County Clerk
Prepared:
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Hardin County Attorney
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TO: FROM:
DATE:
REPORT OF THE STEERING COMMITTEE TO
THE HARDIN MEMORIAL HOSPITAL BOARD OF TRUSTEES
HMH Board of Trustees
HMH Steering Committee ? Harry L. Berry, Judge/Executive and Board Chair Fred Clem, Jr., Magistrate and Board Member Garry King, Magistrate and Board Member Jenny Oldham, Hardin County Attorney John Godfrey, M.D., Vice President & Chief Medical Officer Sharon Wright, Vice President & Chief Nursing Officer
May 1, 2018
Background
On August 15, 2017, the Board of Trustees of Hardin Memorial Hospital (the "HMH Board"), adopted Resolution No. 2017-1. Following an extensive partner search process, this resolution authorized and directed the Steering Committee to: (1) complete its due diligence review of Baptist Health; and (2) negotiate an asset purchase agreement regarding the sale of Hardin Memorial Hospital ("HMH") to Baptist Healthcare System, Inc. ("Baptist Health"), to be submitted to the HMH Board for its review and approval prior to execution.
Having completed each of these tasks, the Steering Committee submits this report to the Board, along with its unanimous recommendation that the HMH Board approve the attached Asset Purchase Agreement (the "APA"). This report summarizes the key terms of the deal that the Steering Committee has negotiated with Baptist Health, as set forth in the APA.
In addition to its own review, the Steering Committee engaged Huron Consulting Group, Inc. to provide financial advisory services, as well as Hall, Render, Killian, Heath & Lyman, P.C. to provide legal advisory services.
Finally, the Steering Committee recognizes that there are several constituencies that will be affected by the HMH Board's decision. During negotiations, the Steering Committee has grouped these constituencies into four overlapping categories:
(1) Hardin County and its residents;
(2) HMH's employees and retirees (our friends and neighbors who have built their careers at HMH);
(3) The physicians in our community, including both those in the HMH Medical Group and on the HMH Medical Staff; and
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(4) HMH itself (one of the last independent, county-owned acute care hospitals in Kentucky navigating a rapidly changing health care landscape).
In addition to summarizing the key terms of the APA, this report seeks to identify how the transaction would impact each of these four constituencies.
Recommendation
The Steering Committee unanimously and resoundingly urges the Board of Trustees of Hardin Memorial Hospital to approve the sale of Hardin Memorial Hospital to Baptist Health according to the terms outlined in the Asset Purchase Agreement (and as summarized in this report).
Summary of Key Terms
(Please note that all section references at the end of each paragraph are to sections in the APA.)
Consideration ? What is Baptist Health Promising in Exchange for HMH?
This $361.4 Million deal is structured in a manner common throughout the health care industry, providing certain compensation to, and assuming certain liabilities of, Hardin County while also committing certain capital to the growth of HMH:
? $235 Million in Capital Investments to Grow HMH. In the first five years, Baptist Health committed a minimum of $150 million to build new facilities, recruit more physicians, upgrade HMH's technology and equipment, and strengthen HMH's position and reputation as the preferred regional healthcare center. After the first five-year period, Baptist Health committed an additional $85 million during a second five-year period, until such time as Baptist Health has committed a total of $235 million. (Section 10.10)
? $126.4 Million Paid to Hardin County. Baptist Health will pay Hardin County a total of $126.4 Million as follows:
o $60 Million Paid to Hardin County at Closing. At Closing, Baptist will pay Hardin County $60 Million, less the amount used to fully fund all liabilities associated with HMH's defined benefit pension plan. The estimated cost to fully fund all pension plan liabilities is $30-35 Million. Note that HMH could not have fully funded its pension plan independently, because use of such a significant portion of its existing cash would have caused HMH to be in violation of various bond-related covenants. Because HMH is operated as a subdivision of Hardin County and not as a separate legal entity, if HMH were unable to fund its pension liabilities, the obligation to do so would ultimately fall on Hardin County. (Sections 2.5 and 6.11)
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