Phoebe made earlier bid for Palmyra

Photo by Laura Williams

Photo by Laura Williams

ALBANY, Ga. -- Documents filed in the ongoing civil action between the Federal Trade Commission, Phoebe Putney Health System and the Hospital Authority of Albany and Dougherty County, show that former chairman Harry Willson made purchasing Palmyra one of CEO Joel Wernick's top objectives when he was hired in 1988.

The FTC and the state attorney general's office are suing to block the authority's $195 million proposed purchase of Palmyra Medical Centers from Palmyra's parent company, HCA.

This week, attorneys for Phoebe and the authority filed several hundred pages of documents going back to 1988 that show the authority but made several attempts over the last 23 years to buy Palmyra, using a special envoy to keep their efforts secret.

Much of the information surrounding the timeline of events comes from the affidavit of Wernick himself, who states that just after he was hired in the late 1980s, Authority Chairman Harry Willson and member Anna Louise McCormack made it clear that acquiring the hospital should be one of his objectives.

"At the time I was hired by the Authority in 1988, I was informed by the Authority that acquiring Palmyra was to be one of my objectives," Wernick stated. "I was told by the then Authority Chairman Harry Willson and Vice Chairman Anna Louise McCormack of the Authority's interest in acquiring Palmyra under reasonable terms because of capacity constraints."

Board members discussed their desire to purchase Palmyra according to minutes of the Feb. 8, 1988, closed-door meeting of the Authority -- which pre-dates Wernick being hired.

The minutes state that then Administrator Duncan Moore felt it was important to update the authority on negotiations between Phoebe Putney Memorial Hospital officials and HCA for the possible purchase of Palmyra.

In the minutes, Moore told the authority that HCA was now unwilling to sell and that HCA had been assured that the fact there had been negotiations would be kept confidential.

Ironically, in minutes of the same meeting, Moore tells the authority that earlier that day, Phoebe had filed a Certificate-of-Need application with the state for a new psychiatric hospital strictly because Palmyra had filed a CON for the same purpose and Moore was concerned Phoebe would lose its psychiatric services.

The minutes read "He said the CON had been filed in response to a CON of the same type by HCA/Palmyra. He said it was necessary to go ahead and file because HCA/Palmyra had filed. It was necessary because Phoebe had the psychiatric service and with their C.O.N., Palmyra would try to take it away."

In the minutes from another executive session in February,1989, Wernick discusses his efforts to negotiate with HCA for Palmyra and introduces Robert Baudino, a lawyer from Des Moines, Iowa, to the Authority. Baudino would spend the next 23 years serving as the intermediary between Phoebe and HCA.

According to Wernick's affidavit, Baudino told him in 1988 that HCA had three main conditions for any possible sale: That there be absolute confidentiality until HCA agreed to public disclosure; that the authority agree to a reasonable purchase and service price; and that that there would be "acceptable or no risk antitrust issues that would prevent the timely consummation of the transaction."

"I understand these to be the same basic prerequisites HCA imposed on PPHS and the authority before it resumed negotiations in 2010," Wernick states.

Wernick said HCA was aware that it could not directly negotiate with members of the authority without having to comply with the Georgia open meetings and records acts -- legislation designed to keep the public in the know about what public officials are doing -- so Baudino was directed to report on negotiations and obtain instructions from the chairman of the Authority "so that a complete transaction...could be brought to the Authority at a duly-called public meeting for approval."

Wernick said a full asset purchase agreement was negotiated in late 1988 and the law firm of King and Spaulding was retained in early 1989 to assist with the acquisition, However, days before the authority was to formally consider the purchase agreement, HCA pulled back from the table without giving a clear reason.

Following the February 1989 executive session, Willson and Wernick tasked Baudino with monitoring HCA for a sign of any renewed interest in purchasing Palmyra.

Wernick states that there were meetings with Willson, himself and Baudino in 1991 and 1992, and that, at some point, Baudino had contacted the FTC about possible antitrust issues. In 1994, Wernick asked Baudino to approach HCA about selling Palmyra but HCA had no interest in selling at that time.

In 1998, Wernick learned that HCA was in the process of selling some of its hospitals and again asked Baudino to approach them about Palmyra -- again they were rebuffed.

In 2003, Baudino formed the Sovereign Group with former HCA executive Douglas Lewis. With this new addition, Wernick again asked them to approach HCA.

"Around March of 2004, I learned from Mr. Lewis that HCA would enter into negotiations to sell Palmyra. However, due to a change in senior leadership at HCA soon after, these negotiations were put on hold," Wernick states. "Later that year, we were advised that HCA would be unwilling to sell."

Wernick would again send Baudino to HCA in 2007 only to be denied before learning, in the summer of 2010, that HCA may be looking to sell Palmyra.

On September 13, 2010, Wernick states that he had learned that HCA was willing to hear a proposal.

On Sept. 21, Wernick says he met with the current chairman of the authority, Ralph Rosenberg, and vice chairman Dr. Chuck Lingle. Wernick says both men directed him to move forward with negotiations on the authority's behalf, after which, both men signed confidentiality agreements.

On October 7, Wernick told the PPHS board that HCA may be willing to sell. They, too, signed confidentiality agreements.

On November 10, Wernick, Rosenberg, Lingle and Authority attorney James Reynolds, reviewed the formal written proposal, which was approved by the chair and vice chair and sent to HCA by Baudino and Lewis.

It was at this meeting that the decision was made to consult each of the authority members individually to inform them of the reasons for moving forward and the terms, Wernick states.

Wernick again met with individual authority members in December 2010.

It was around this time that HCA implemented what Wernick calls a "termination fee." In the contract its called a "Break-off" fee and essentially is a hedge for Palmyra in case the deal was cast off by the authority prior to closing. If that were to happen, Phoebe would be responsible for paying HCA $35 million as a remedy for damages suffered by the public disclosure that the hospital was for sale.

Tommy Chambless, vice president of legal affairs for PPHS, said Thursday that the stipulations for completing the deal by June 1, or October 1 have been extended following an agreement by both parties until December 2011.

The first public discussion of the deal came on the morning of December 21, when the authority made its formal vote to accept the purchase agreement.

Since that time, the FTC and the state Attorney General's office have tried to stop the purchase saying that if Phoebe were to take over Palmyra it would significantly impact the consumer's choice of medical facilities and would likely drive healthcare prices up.