- Morehead Memorial's fate still undecided as hearing adjourned after 3 hours of testimony
- December 8, 2017
They came in scrubs, one having just finished a 12-hour night shift in the emergency department. Others wore blue Morehead Memorial t-shirts; some had large, round “I trust Morehead” stickers — all were community members, many employees, showing support for the Eden hospital.
There were more than 55 of them, and when coupled with the numerous lawyers and journalists present, the courtroom was standing-room-only, buzzing with anticipation as they waited to hear if a bankruptcy judge would approve the sale of Morehead Memorial, a move considered to be the only way to save the floundering hospital.
But after three hours, the hospital’s fate is still undecided.
A hearing was held Wednesday morning to approve the sale of Morehead Memorial to Empower iHCC, a Miami, Fla. company selected by the hospital’s trustees as the successful bidder for the facility and its assets.
Judge Benjamin Kahn adjourned the hearing until Monday at 9: 30 a.m following a tense three hours, which included a request by UNC Health Care to reopen the auction process so it can submit a second bid for Morehead Memorial.
"Bankruptcy is a process," said Dana Weston, chief executive officer, after the hearing was continued. "We're going to have to let the process work."
The focus of the hearing centered on whether Empower iHCC can come through financially with its offer as well as keep Morehead Memorial open. Since the auction, Empower iHCC has increased its bid to include more than $11 million in cash, an capital investment of $18 million and a pledge to keep the hospital open for 10 years.
The concerns are not new. Since the company placed its successful bid for Morehead Memorial, questions have been raised about its ability to keep the hospital open and make it financially stable. During the hearing it was the N.C. Attorney General’s office and the creditor's committee questioning the sale to Empower.
"We do have concerns about a new entity coming in," said Special Deputy Attorney General Jennifer Harrod during the hearing. "We just need more visibility."
Empower iHCC was formed on Oct. 16 as a partnership between the Empower Group and iHealthcare Inc. The company, which outbid organizations such as Cone Health and UNC Health Care, is largely unknown in the Triad. It owns two facilities in Danbury and Plymouth.
Empower, which has multiple affiliate companies, has made it its business to save rural, cash-strapped hospitals, like Morehead Memorial. Concerns have come about because in helping these hospitals, the Empower companies, and the group's lead executive Jorge Perez, have become involved with at least two hospitals swamped with financial issues.
The N.C. Department of Justice, headed by Attorney General Josh Stein, is one of several organizations to file an objection to the sale of Morehead Memorial.
The hospital, as a nonprofit, has to give the department notice before selling "substantial assets," and the attorney general's office intervened in order to ask questions and conduct a 30-day review, said spokeswoman Laura Brewer.
In such a sale, the attorney general's office looks to ensure that a nonprofit continues its "charitable mission," or in Morehead Memorial's case, that the hospital stays open.
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"It's unclear who will enforce that promise [to keep the hospital open]," Harrod said.
Kahn overruled the objection, but said "the court is equally concerned about the enforceability."
In response to the concerns raised, Perez dismissed comments made during the hearing that referred to Empower as a "shell company."
"[Empower iHCC] is the company doing the acquisition," he told the Triad Business Journal. "We will be successful. I've never closed a hospital in my life."
An attorney for the creditor's committee, which in a Nov. 2 filing said it supported the sale if it could be shown that Empower iHCC has “the financial wherewithal” to complete the deal, pushed expert witnesses and an executive with the company to provide further evidence of its financial capability.
In addressing those concerns, Noel Mijares, the chief executive officer of Empower iHCC, said the company has received a commitment for a $15 million loan, which would be used towards its purchase of Morehead Memorial. Empower iHCC's partnership with other Empower affiliates provides the company with access to funding if there is a shortfall in covering the cost of the transaction, he said.
Mijares said during the hearing that the company has just under $5,000 in its bank account.
When asked by attorney, Andrew Sherman, what other sources of capital the company had, Mijares referred the question to the company's chief financial officer.
While on the stand, Mijares deferred several questions to the CFO, including when asked to address certain conditions regarding the $15 million loan, such what happens if Empower and the company issuing the loan are unable to agree on the value of real estate involved in the deal. Kahn eventually told Mijares to stop deferring to someone else.
It was during Mijares testimony that Kahn called for a recess to meet with counsel. When they returned to the courtroom, he said the hearing would continue next week.
Time constraints, along with some concerns about the loan commitment, led to the hearing being continued, according to one of the parties involved.
"We are a solid company and I just don't understand why the financial part was a huge concern," Perez said.