Tuesday, May 17, 2022

Asheboro hospital finds its suitor

Randolph Hospital’s long, jagged journey to its July 1 sale to American Healthcare Systems has been blighted by staff changes, other potential suitors, budget cuts and a Chapter 11 reorganization.

When American Healthcare formalizes its union in Asheboro, it will be the latest turn after the not-for-profit system developed financial pressures related to 2007, when it used a $49 million bond to build an imaging and endoscopy expansion. Amid changes in health care, Randolph struggled to repay the debt, leading to a bankruptcy filing in March 2020.

The sale comes as Randolph has stabilized financially after reporting combined fiscal-year losses of $27 million from 2016 through 2018. It had a positive margin of $2.3 million in the 2019 fiscal year, $9.6 million in 2020 and $1.9 million through March 2021, according to hospital financial reports. The hospital’s fiscal year ends on Sept. 30 and those margins exclude non-recurring expenses. A September 2019 filing shows Randolph had total debt of about $63 million, including $25 million in secured mortgages and notes payable

Originally a unit of Randolph County government, the hospital transitioned years ago to a not-for-profit authority, which has occurred in many N.C. cities. It employs 1,100, making it one of the county’s largely payrolls. But industry consolidation has reduced the number of independent hospitals in the state over the last decade as smaller operators have lost market share to bigger systems. 

Greensboro-based Cone Health had an agreement to acquire Randolph, but pulled out last year shortly after the start of the pandemic, Randolph spokesperson April Thornton says. The Asheboro hospital is about 30 miles from Cone’s main Greensboro campus, making it a logical partner. But Cone had bigger priorities as it signed a partnership agreement last year with Norfolk, Va.-based Sentara Healthcare, a deal that unraveled in May.

With Cone out of the picture, Randolph’s leadership scrambled for a new suitor. It initially agreed last August to sell to Tennessee-based Dava Foundation, but the bankruptcy court process led to an auction for other bidders to emerge. American Healthcare was approved as the winning bidder. 

To help Randolph through its challenges, the N.C. General Assembly approved a loan for as much as $20 million that would be administered through the Local Government Commission and UNC Healthcare. It is part of a state program aimed to stabilize rural health care. The commission eventually approved a $12 million loan — less than the initial $20 million plan — that will benefit American Health’s effort to improve the hospital.

On June 4, the bankruptcy court approved a purchase price of $10.2 million that will put control of Randolph Health’s assets in the hands of American Healthcare. It’s a newly formed company led by Michael Sarian, a former CEO of California-based Prime Healthcare, which operates 46 hospitals in about 14 states, though none in North Carolina.

When American Healthcare takes over, former Blowing Rock Hospital CEO Tim Ford will become the Asheboro hospital’s top leader. Ford had been CEO of Springfield Medical Care System, a nonprofit Vermont-based hospital group. He has been helping with the transition. Former CEO Angela Orth left the organization on June 5. 

Randolph has no plans for any public events on July 1, when American Healthcare takes charge, Thornton says.

Looking ahead, the hospital faces similar trends as its state and national peers. Rural hospitals tend to have more patients covered by federal Medicare and Medicaid insurance programs, which don’t provide as much compensation as private insurance plans. 

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