In re Barnwell Cnty. Hosp.

• Citation: 471 B.R. 849
• Decision Date: 23 May 2012
• Docket Number: No. 11–06207–dd.,11–06207–dd.
• Court: United States Bankruptcy Courts. Fourth Circuit. U.S. Bankruptcy Court — District of South Carolina
• Parties: In re BARNWELL COUNTY HOSPITAL, Debtor.

471 B.R. 849

In re BARNWELL COUNTY HOSPITAL, Debtor.

No. 11–06207–dd.

United States Bankruptcy Court, D. South Carolina.

May 23, 2012.

Barbara George Barton, Columbia, SC, Lindsey Carlbert Livingston, Columbia, SC, Stanley H. McGuffin, Columbia, SC, for Debtor.

ORDER CONFIRMING DEBTOR'S FIRST AMENDED PLAN FOR ADJUSTMENT OF DEBTS PURSUANT TO CHAPTER 9 OF THE BANKRUPTCY CODE

DAVID R. DUNCAN, Bankruptcy Judge.

This matter is before the Court for confirmation of the First Amended Plan for Adjustment of Debts [Doc. 126] as modified by the Debtor's Modification to the First Amended Plan for Adjustment of Debts (“Modification”) [Doc. 205] (collectively the “Plan”) filed by Barnwell County Hospital (the “Debtor”). Objections to Debtor's Plan were filed by Creekridge Capital, LLC, (“Creekridge”), Nexsen Pruet, The United States of America on behalf of the United States Department of Health and Human Services (“HHS”), Palmetto Emergency Care, P.A. and Palmetto Hospitalist Associates (collectively, “Palmetto”), General Electric Company d/b/a GE Healthcare Diagnostic Imaging (“GE”), Robert M. Peeples and certain participants of the Barnwell County Hospital Pension Plan (collectively, “Peeples”), and Intervener Don Alexander (“Alexander”).¹ A hearing was held on Debtor's Plan on April 30, 2012 and May 3, 2012. Prior to or at the conclusion of the hearing, all objections to the Plan were consensually resolved except for the objections of Peeples, Alexander and GE. Based on the findings of fact and conclusions of law stated on the record at the hearing and set forth in detail below, Debtor's chapter 9 Plan is confirmed.

HISTORY AND BACKGROUND OF DEBTOR

The Debtor was created in 1953 by act of the South Carolina Legislature to provide hospital facilities to the residents of Barnwell County (the “County”). The legislature created the Barnwell County Hospital Board (the “Board”) and charged it with the responsibility of constructing a hospital and making all rules and regulations for the operations and management of the Debtor. Debtor operates as a hospital at 811 Reynolds Road, Barnwell, South Carolina. The Debtor also owns and operates two provider-based rural health clinics in the southwestern rural area of South Carolina serving the communities of Blackville and Williston.

The Debtor is and has been unable to pay its debts as they become due. For years, Barnwell County provided funding to keep the Debtor operating, however the Debtor was informed that the County would no longer provide funding. Furthermore, as a rural hospital, Debtor faces numerous business challenges, including a low customer volume and a high number of indigent patients. Consequently, the Debtor has a limited ability to pay for new technology and facilities that larger hospitals in neighboring areas can provide. Such technology and facilities are necessary to attract specialty physicians to work at the hospital in order that, in turn, increase revenue and profit opportunities.

Based upon those factors and others, the Debtor, along with Bamberg County Memorial Hospital (together with the Debtor, being hereafter referred to as the “Hospitals”), sought a third party purchaser to combine the existing primary service areas and healthcare facilities and businesses located in and owned by Bamberg and Barnwell Counties, South Carolina (collectively, the “Counties”), into one regional hospital or health system in order to provide their residents access to efficient and effective healthcare, and to have that care delivered through well-equipped, contemporary facilities designed to meet the specific needs of each community. In order to provide such access, it was decided that a collaborative regional system for healthcare for the residents of the Counties would attract the financial support needed to provide healthcare services that can sustain themselves through changes in medical technology, regulations, and reimbursement, and can support continued upgrades in facilities and services.

To help the Counties find a third party to achieve the Counties' goals, the Counties engaged Stroudwater Capital (“Stroudwater”) to reach out to all interested people in the region in order to determine what was important to the Counties' residents and to find potential parties who were interested in developing the regional health system. After an extensive solicitation process, SC Regional Health System, LLC (“RHS”) was identified and approved as the entity best suited to acquire substantially all of the assets of the hospitals and to create a regional health system in accordance with the identified goals of the Counties.

On September 29, 2011, the Debtor, along with Bamberg County Memorial Hospital ² and the Counties, executed an Asset Purchase Agreement (“APA”) with RHS for the acquisition of substantially all of the assets of the Hospitals. The parties also executed a Development Agreement. The APA and Development Agreement provide that RHS will develop and operate an integrated healthcare delivery system to be known as the Regional Health System (“Regional Health System”) to serve both Counties. The APA and Development Agreement provide for the construction of a new hospital with at least 23 in-patient beds.

The Plan is based on the APA and contemplates that both the Debtor and Bamberg County Memorial Hospital will have filed bankruptcy. Both the Debtor and Bamberg County Memorial Hospital must be successful in having their respective plans confirmed, or the APA will not be consummated.

CONFIRMATION OF DEBTOR'S PLAN

The Debtor having:

a. on October 5, 2011 (the “Petition Date”), filed its voluntary petition for relief under chapter 9 of the United States Bankruptcy Code (the “Bankruptcy Code”),³ in the United States Bankruptcy Court for the District of South Carolina (the “Bankruptcy Court”);

b. published notice of the filing of its chapter 9 petition and request for the entry of an order for relief thereunder in The State and People–Sentinel newspapers, and in addition, mailed notice to all known creditors and parties in interest;

c. filed, on February 10, 2012, a disclosure statement and plan for adjustment of debts;

d. filed, on March 23, 2012, a First Amended Disclosure Statement and First Amended Plan for Adjustment of Debts, which was thereafter supplemented, modified and amended on May 9, 2012, (as such, the “Disclosure Statement” and “Plan”, respectively);

e. distributed solicitation materials consistent with the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”), the District of South Carolina Local Bankruptcy Rules (the “Local Bankruptcy Rules”), and the Order (I) Scheduling Hearing on Confirmation of the First Amended Plan for Adjustment of Debts; (II) Approving Solicitation Procedures; (III) Establishing Deadlines; and (IV) Approving Form and Manner of Notice of the Confirmation Hearing [Docket No. 130] (the “Solicitation Procedures Order”);

f. filed, on April 27, 2012, Debtor's Ballot Tabulation (“Ballot Tally”), detailing the results of the Plan voting process; and

g. filed, on May 4, 2012, the Debtor's Memorandum in Support of Confirmation of the Plan (“Plan Confirmation Brief”).

The Bankruptcy Court having:

a. conducted a hearing on the Disclosure Statement on March 19, 2012 and approved the Disclosure Statement by Order dated March 23, 2012;

b. entered the Solicitation Procedures Order on March 23, 2012;

c. set April 30, 2012 at 10:00 a.m., prevailing Eastern Time, as the date and time for the commencement of the hearing to consider confirmation of the Plan (the “Confirmation Hearing”);

d. reviewed the Plan, the Disclosure Statement, the Ballot Tally, the Plan Confirmation Brief and all filed pleadings, exhibits, statements and comments regarding confirmation of the Plan under the Bankruptcy Code (“Confirmation”), including all objections, statements and reservations of rights;

e. heard the statements, arguments and objections made by counsel in respect of Confirmation;

f. considered all oral representations, testimony, documents, filings and other evidence regarding Confirmation;

g. overruled any and all objections to the Plan and confirmation thereof; and

h. taken judicial notice of the papers and pleadings filed in this chapter 9 Case.

NOW, THEREFORE, it appearing to the Bankruptcy Court that notice of the Confirmation Hearing and the opportunity for any party-in-interest to object to Confirmation have been adequate and appropriate as to all parties affected or to be affected by the Plan and the transactions contemplated thereby, and the legal and factual bases set forth in the documents filed in support of Confirmation and presented at the Confirmation Hearing establish just cause for the relief granted herein; and after due deliberation thereon and good cause appearing therefore, the Bankruptcy Court makes and issues the following Findings of Fact, Conclusions of Law and Orders:

FINDINGS OF FACT AND CONCLUSIONS OF LAW

Jurisdiction and Venue.

The Bankruptcy Court has jurisdiction over this chapter 9 case pursuant to 28 U.S.C. § 1334. Venue in the Bankruptcy Court was and is proper under 28 U.S.C. §§ 1408 and 1409. The Debtor is an entity eligible for relief under Bankruptcy Code § 109(c). Confirmation of the Plan constitutes a core proceeding under 28 U.S.C. § 157(b)(2), and the Bankruptcy Court has exclusive jurisdiction to determine whether the Plan complies with the applicable provisions of the Bankruptcy Code and should be confirmed.

Judicial Notice.

The Bankruptcy Court takes judicial notice of (and deems admitted into evidence for Confirmation) the docket of this chapter 9 case, including all pleadings and other documents on file, all orders entered, all hearing transcripts and all evidence and arguments made, proffered or adduced at the hearings held before the Bankruptcy Court during the pendency of this case. Any resolutions of objections to Confirmation explained on the record at the...