Update: St. Francis in discussions with Piedmont Healthcare

Financially strapped St. Francis Hospital has announced it has entered into “exclusive discussions about a potential relationship” with Atlanta-based Piedmont Healthcare.

The announcement of the agreement with Piedmont comes about a month after the Columbus hospital announced it was looking for “potential partners to sustain this valuable community asset.”

St. Francis, which went public Nov. 20 with its financial problems that included what it called a nearly $30 million “accounting error” after denying for months there were any issues, announced the talks with Piedmont in a news release Thursday morning.

“The board believes a partner is the best solution for the viability of St. Francis,” Board Chairman Richard Y. “Bo” Bradley said in the news release. “While it is too early to speculate on this potential relationship, we are hopeful these exclusive discussions will bring the two organizations together.”

Both organizations are bound by a strict confidentiality agreement, according to the release. No details about when the talks started or how long the discussion would last were included.

St. Francis spokesperson Amy Adams said Thursday morning hospital officials would not be doing interviews about the relationship with Piedmont Healthcare.

Elisabeth Wang, executive director of communications for Piedmont, also declined to discuss details.

“We don’t know what will come out of these discussions,” Wang said.

The effort to identify and evaluate potential partnership options for St. Francis has been led by the board and a sub-committee of the Physician Leadership Board, Bradley stated last month.

Piedmont Healthcare is a private, not-for-profit organization with five hospitals and multiple primary care and specialty physician groups that serves nearly 2 million patients primarily in North Georgia communities but also across the state. Of Piedmont’s 11,000 employees, more than 3,000 are nurses who serve in traditional nursing roles as well as leadership and administrative positions. Piedmont delivered over 9,600 babies, performed over 51,000 surgeries, provided 531,145 outpatient encounters, gave 219 transplant patients a second chance at life and handled nearly 263,000 emergency room visits last year, according to Thursday’s release.

Piedmont’s last hospital acquisition was three years ago when it acquired Piedmont-Henry in Stockbridge. That hospital has 215 beds.

The severity of St. Francis’ issues came to light in November when officials outlined what they termed an accounting inaccuracy that was discovered in late October. The hospital eliminated 80 jobs 65 of them filled with employees on Nov. 20.

Former Chief Financial Officer Matt Moore, who had been with the hospital for nine years and had previously worked with President and Chief Executive Officer Robert Granger at a South Florida hospital, was suspended Oct. 27 and “permanently relieved of his duties” Nov. 14, Granger said.

Granger and the board of trustees had been operating for at least three years with reports that overestimated the hospital’s revenues and underestimated its expenses by $29.7 million, Granger said.

While Granger and the board thought the hospital was operating at a point that was break-even or better, it was actually losing money.

The corrected financial information released in November showed that St. Francis was operating at a $12.8 million deficit for 2014.

Rumors of St. Francis’ issues started in the summer.

In July, Granger was questioned by multiple media outlets, including the Ledger-Enquirer, about the hospital’s financial status after an email circulated throughout the community claiming that some vendors were not getting paid in a timely manner.

Granger repeatedly denied it and responded with a July 24 memo to his board that stated: “Clearly someone in the area has an agenda to smear our good name, and it is quite disappointing that an individual has chosen to do this. We will continue to operate as normal and enjoy the high road. The view is much better from there.”

In November, the hospital had about 2,800 full- and part-time employees and was previously operating under an annual budget of $295.7 million.

The financial crisis came a year after St. Francis completed a $150 million project that included the largest expansion in the nearly 65-year history of the hospital. The project started in October 2011 and expanded its 600,000 square feet of space to nearly 1 million. It included two large structures a clinic services tower and medical office building and creation of a new Heart Hospital and a Women’s Hospital.

Other elements of the expansion included a larger surgical suite, a new operating room, a cardiovascular intensive care unit and a medical intensive care unit. It also brought 230 private patient rooms, an improvement from the previous 75 private and 110 semi-private rooms at the hospital. There’s also a new conference center with a 324-seat auditorium. The hospital added about 300 jobs during the project.

The expansion was financed by the U.S. Department of Housing and Urban Development Federal Housing Administration’s Section 242 Hospital Mortgage Insurance Program, officials said. That loan is in excess of $225 million and included some existing debt at the time of the construction, a hospital spokesperson confirmed.

Granger said Nov. 20 that HUD and Columbus Bank and Trust Co., the hospital’s two largest lenders, were notified of the misinformation on the financial reports. He said no payments to either institution had been missed.

The board has stuck by Granger during the crisis. He has been the CEO of St. Francis for more than 10 years and previously worked as a chief financial officer for two Florida hospitals, the most recent being Sacred Heart Health System in Pensacola.

St. Francis has had regular audits from the Albany, Ga., accounting firm of Draffin & Tucker LLP, but Granger said the audits never revealed the overestimation of revenue and the underestimation of expense.

When the board was informed of the situation in late October, Michelle P. Madison of Morris, of the Atlanta firm of Manning and Martin LLP of Atlanta, was hired to conduct an independent investigation. No criminal activity has been discovered at that time, Granger said.

Piedmont St. Francis Discussions

This story was originally published January 15, 2015 at 10:24 AM with the headline "Update: St. Francis in discussions with Piedmont Healthcare."