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Kennewick hospital could have new owners in a month

Tennessee-based RCCH Healthcare could take over Trios Southridge Hospital within the month after a federal bankruptcy judge confirmed the Kennewick Public Hospital District's reorganization plan late Wednesday.
Tennessee-based RCCH Healthcare could take over Trios Southridge Hospital within the month after a federal bankruptcy judge confirmed the Kennewick Public Hospital District's reorganization plan late Wednesday.

Tennessee-based RCCH Healthcare Partners could take control of Kennewick's Trios Health facilities in less than a month.

The Washington Department of Health assured the Kennewick Public Hospital District it will move swiftly to process the needs assessment once RCCH files an application this week, said Jack Cullen, an attorney Foster Pepper, the hospital district's Seattle law firm.

The district will transfer most of its assets to the company as part of a bankruptcy plan confirmed Wednesday by a federal judge in Spokane. The deal won't go through until state regulators sign off as well.

Judge Frederick Corbit signed an order confirming the reorganization plan shortly before 7 p.m. Wednesday, more than five hours after Trios officials announced the decision in a news release.

The district said it based the decision on the judge's comments in court. Officials did not expect it to take so long for the order of confirmation to be entered into the record.

The fourth and final plan alters some of the terms contained in the third plan, which was approved by the district's hospital board following a 70-minute executive session Monday night.

Cullen said the board authorized interim CEO Scott Landrum to sign the final version.

Notably, the plan earmarks $3.95 million for unsecured creditors. RCCH will contribute most of the money.

The hospital district will contribute only a small amount of that in addition to contributing to a creditor's fund after five years.

The $3.95 million was a critical last-minute addition that helped win approval from the committee of unsecured creditors, which had formally objected to the plan.

Attorneys hammered out the deal in an all-day mediation session June 14 in New York City.

Trios Exterior 2018
Tennessee-based RCCH Healthcare could take over Trios Southridge Hospital within the month after a federal bankruptcy judge confirmed the Kennewick Public Hospital District's reorganization plan late Wednesday. Tri-City Herald

The new plan provides greater clarity about the public hospital district's future once it no longer operates any hospitals.

The district will continue to exist and to levy property taxes. It collected nearly $1.4 million this year.

Under the plan, the district will retain 20 percent of the incoming tax revenue to support its continuing education mission.

Tax money also will support the substantial cost of stepping out of the hospital business, Cullen said. That includes an exhaustive and expensive state audit of the hospital's books..

More importantly, the property tax stream is committed to supporting the cost of providing indigent care and to resolving future Medicare billing disputes.

Medicare routinely scrutinizes past transactions for billing errors. When it believes that it has overpaid for a procedure, it deducts the amount from its current payments.

There is no way to predict what the cost of old cost corrections could cost RCCH once it takes over the Trios facilities, Cullen said.

The tax stream will serve as a form of insurance for the district can draw from to cover Medicare cost adjustments billed to RCCH.

Cullen said there is no way to know what the costs associated with pre-sale billing adjustments could amount to. Without the backstop, the RCCH deal would not go through.

The deal will end if RCCH closes or sells the Trios facilities. At that time, the district could reevaluate if it needs to continue to exist.

Kennewick Public Health District filed for bankruptcy almost one year ago as debts associated with construction of its Southridge hospital threatened to overwhelm its balance sheet.

Kennewick voters overwhelmingly rejected a tax levy to fund the hospital in 2007. Five years later, the board entered an agreement with a partner to build the 74-bed, $112 million hospital. It opened in 2014 but failed to meet its financial projections.

The district said its debts topped $221 million when it filed for protection under Chapter 9 of the U.S. Bankruptcy Code. Without the sale, the district would have been forced to shut down and lay off its 1,000 employees.

RCCH pledged to employ all Trios employees. Employees will not have to reapply for their jobs, but will have to submit to background checks. The for profit healthcare system is also pursuing Lourdes Health Center in Pasco.

The Trios system will be its third hospital operation in the Northwest, where it has a presence in Olympia, Missoula, Mont., and McMinnville, Ore.

Wendy Culverwell: 509-582-1514
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