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Proposed sale of West Virginia state-owned hospitals valued at $140 million

(Graphic Illustration - Capitol Notes - Image generated through the use of ChatGPT)

CHARLESTON — Newly released documents show that a proposed sale of four long-term care facilities owned by the state of West Virginia could come to a $140 million deal when all is said and done.

The closing date for the sale of Hopemont Hospital in Preston County, Jackie Withrow Hospital in Raleigh County, John Manchin Sr. Health Care Center in Marion County and Lakin Hospital in Mason County to New York-based Marx Development Group was supposed to be Tuesday. However, Marx exercised its right to a 30-day extension.

According to an Aug. 11 asset purchasing agreement between MDG and the state obtained from the office of Gov. Patrick Morrisey through a Freedom of Information Act request, MDG will pay the state $60 million in cash combined with an $80 million ancillary consideration component.

The additional $80 million would cover operational losses during the transition period as the state-owned long-term care facilities transfer to private for-profit facilities managed by MDG subsidiary Majestic Care, a long-term care company with facilities in Indiana, Michigan and Ohio.

The $80 million would also fund the acquisition and construction of a minimum of three new facilities. If MDG is able to fulfill those obligations for less than $80 million, the remaining balance would be paid to the state.

In August, Morrisey announced the proposed purchase of four of the state’s seven publicly owned hospitals. Hopemont, Jackie Withrow, Manchin and Lakin specialize in long-term care for low-income and indigent individuals, those with intellectual and development disabilities, individuals with mental illness, older incarcerated individuals and other wards of the state.

The four hospitals altogether have 511 beds. According to the state, the facilities operate at a combined $6 million annual loss, with long-term projected costs expected to rise to nearly $40 million per year. Needed capital investments to update and renovate the facilities is estimated to cost up to $100 million.

Morrisey said MDG plans to invest in building from three to five new health care facilities to replace the aging state facilities. The purchasing agreement establishes a detailed timeline with specific deadlines for site acquisition, financing, permitting and construction, but the agreement includes no guarantees the new facilities would be built in the same areas as the existing hospitals.

Failure to meet the milestones would trigger significant financial penalties, including escalating escrow deposits. A material failure by MDG to develop the new facilities, such as failing to acquire land within 365 days of closing or failing to apply for certificates of occupancy within 780 days, would result in an automatic payment of $45 million to the state.

MDG also is bound by an “operations covenant” to ensure continuous operation of the existing long-term care facilities until the new ones are complete.

The company would be required to operate the new facilities for a minimum of three years post-completion and maintain specific bed capacities.

House Bill 2006, passed in 2023, split the former Department of Health and Human Resources into the Department of Health, the Department of Human Services and the Department of Health Facilities. As part of that bill, the secretary of the Department of Health Facilities was empowered to sell the facilities under its supervision.

The department announced in July 2024 it had entered into a contract with Lument Securities LLC to develop a plan that included selling the four long-term care facilities to potential buyers while ensuring care for patients remains uninterrupted. Majestic Care confirmed that Lument first reached out to MDG last year, though negotiations were paused during the transition from former Gov. Jim Justice to the Morrisey administration. MDG signed a letter of intent with the state on July 3.

MDG/Majestic Care has agreed to maintain care for the current residents at the four facilities, though future care for some patient categories, such as wards of the state, that require long-term care is uncertain.

All state employees at the facilities would be re-hired with Majestic Care, only needing to prepare a formal application, but not needing to be interviewed. Questions remain about those public employees with state pensions.

A lawsuit was filed at the end of August by state Sen. Joey Garcia, D-Marion, on behalf of a client seeking to halt the sale of John Manchin Sr. Health Care Center.

Steven Allen Adams can be reached at sadams@newsandsentinel.com.

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