Southern Regional files to reorganize

Clayton hospital to stay open while officials consider sale.

The nonprofit owner of Southern Regional Medical Center in Riverdale has filed for Chapter 11 reorganization in U.S. Bankruptcy Court in the Northern District of Georgia.

Clayton County’s lone hospital said in an announcement that it will remain open and operating while Southern Regional Health System officials consider a proposed sale of the medical center to a California-based nonprofit.

Southern Regional said it will fulfill its obligations to its employees and vendors, and continue to deliver high-quality medical care. The organization also said it has obtained a commitment for post-bankruptcy financing.

Last week, Prime Healthcare Foundation signed a letter of intent to acquire the 331bed hospital.

The sale is aimed at allaying a potential shutdown of Southern Regional, reeling from a heavy load of uncompensated care.

Clayton has a relatively high percentage of uninsured residents. The hospital reported $21 million in uncompensated care in fiscal 2014, and 30 percent of its ER patients last year had no insurance.

CEO Kim Ryan said recently that the hospital needed an infusion of $6 million by early July.

“If we can’t get that funding, we can’t survive. We’ll have to close services or shut the doors,” she said.

Prime Healthcare Foundation said it has pledged to maintain Southern Regional as an acute care hospital, including emergency services, for at least five years.

In addition, the foundation has agreed to make $50 million in capital improvements over the next five years. It also has agreed to hire “substantially all employees currently at the hospital”; to maintain charity care at or above existing levels; to maintain a local governing board and independent medical staff; and to spend at least $1 million in new physician recruitment.

Southern Regional said it expects Prime Healthcare Foundation will complete the acquisition late this year.

Jim Adams, Southern Regional Health System’s board chairman, said the purchase of the hospital “will preserve jobs, access to health care in Clayton County, and allow us to emerge from bankruptcy in a relatively short time frame.”

“We believe Southern Regional Medical Center is essential to the health of Clayton County residents, the community’s economic future, and the availability of health care in the Southern Crescent.”

The bankruptcy move is not unprecedented for a hospital in Georgia. Last November, the board of trustees for Hutcheson Medical Center in Fort Oglethorpe in northwest Georgia voted to file for Chapter 11 reorganization.

During bankruptcy, other potential buyers would have the opportunity to submit better bids for the hospital.

Under the current arrangement, Southern Regional would be Prime Healthcare’s first hospital in Georgia. The foundation and Prime Healthcare Services are known for buying distressed hospitals and turning them around financially.