RANDOLPH COUNTY — Updates provided to the Randolph County Board of Commissioners at its regular May meeting on the progress of Randolph Health were met with some concern by members of the board.
Tim Ford, CEO of Randolph Health American Healthcare Systems, presented to commissioners activities the hospital has undertaken since a merger was facilitated in 2021 after the previous administration filed for bankruptcy. Commissioner David Allen, one of two commissioners who sit on a board that oversees the hospital’s involvement, responded on behalf of the county, expressing concern over the infrequency and informality of such updates.
“I think that the (Local Government Commission) and this board thought that this was the board that would govern the hospital,” Allen said. “That’s my concern. We’re not really a governing board. We’re an advisory board.”
In July 2021, the Randolph County Board of Commissioners moved the county toward a merger for Randolph Health, approving the advancement of $3 million to American Healthcare Systems. The decision to provide the advance came as the board sought to preserve the primary health care provider in Randolph County by meeting the request of a buyer that agreed to a sale valued at more than $10 million.
“We were intent on saving a hospital in Randolph County, we went through any number of processes, changes, decisions by others to get there,” Darrell Frye, chairman of the board of commissioners, said at the time. “We wanted to keep our hospital, to get it off to a good start and provide health care services to the citizens. That’s why we went through all of those things.”
A bankruptcy court previously approved an amended sales agreement with California-based American Healthcare Systems in 2021. Randolph Health filed for reorganization bankruptcy protection in March 2020 through the U.S. Bankruptcy Court for the Middle District of North Carolina. The court initially approved the sale to American Healthcare Systems to move forward.
The Randolph County Board of Commissioners played a direct role in the merger. On behalf of Randolph Health, the commissioners applied for a $12 million loan through the state Rural Health Care Stabilization Act. The General Assembly created the hospital loan fund to help preserve smaller medical centers in rural areas.
The $12 million for the Randolph Health merger essentially served as a bridge loan helping with the financial transition to the new ownership. Frye said this month that the first $3 million commissioners advanced was supposed to be for capital improvements, but that money did not go for capital purchases, but instead was used to hire nurses.
“I understand that,” Frye said of the decision to hire additional nurses. “Nurses at the hospital hadn’t had a pay increase in years. We were losing nurses every day. In order to keep the hospital open and provide services, we had to have nurses. But the official acknowledgement of that took over a year to get. That has caused us to have a little angst about this process.”
Frye also explained that the nature of the hospital changed with the transition to American Healthcare Systems. Previously a not-for-profit hospital, Randolph Health is now run as a for-profit entity. This means, among other things, that the institution now pays property taxes, the sum of which was paid earlier this year totaling $517,000. Despite the benefits of keeping the hospital operational and receiving tax revenue, the county maintains that significant questions remain and must be answered.
“For the first 18 months, we got no written financial information other than that we’re doing well,” Allen reiterated. “Part of the reason that the LGC put these requirements in was so that the county could have some supervision and [fiscal] responsibility. I know we had $3 million that went out initially in July 2021. We thought it was for capital improvements; it was used for operating capital.”
The board of commissioners expects to gain clarity on their arrangement with American Healthcare Systems — an LLC run by Mike Sarian, chairman and CEO — later this month. On May 18, commissioners say they should learn if they have voting rights.
The board tabled items pertaining to their partnership with American Healthcare Systems until its June meeting, hoping to receive the clarity it seeks later this month. In the interim, it continues to mull its options.
“The only other recourse that we have until this is adequately resolved … is to not pay the invoices sent to us until we get this cleared up,” Frye said. “That’s the only recourse that we would have in this process. I’m not saying that this is what we’re going to do.”
Ford responded to commissioners at the May meeting, offering assurances that he would discuss the matters with Sarian, who he said ultimately has the final say on day-to-day operations. He indicated that he understands commissioners believe they are entitled to greater oversight and will communicate that to Sarian.
“I think we can make improvements to the board process and we can allow for voting on certain items,” Ford said. “It’s probably a work in progress. … I’d be glad to take suggestions back to the owner, Mike Sarian, and see what we can do to meet the covenants. We certainly want to do that.”
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