Greenville Hospital System and Palmetto Health officials said last week they will continue to review options to try to save some of the $80 million to $100 million in interest that a failed $1.5 billion debt restructuring would have generated.
As part of their new partnership, the hospitals had planned to refinance $642 million in GHS bond debt and $850 million in existing debt owed by Palmetto Health.
The partnership was finalized in November. The new company under which GHS and Palmetto Health will operate will be one of the 50th largest hospital systems in the nation, and the largest in South Carolina, serving 1.2 million patients a year, earning a projected $3.9 billion in annual net revenue, and covering half the state.
While county councils in Richland and Sumter counties voted to support refinancing, the Greenville and Oconee county councils did not. Greenville County Council tabled the request. Most of the debt the new company was refinancing came from outside of Greenville County, and there were fears that Greenville County residents could be stuck with higher bills to pay for it.
Gov. Henry McMaster denied a request from the hospitals to approve the refinancing, saying he had concerns about spreading the Palmetto Health bond debt across Greenville and Oconee counties when those county councils did not approve.
McMaster also cited a lawsuit filed by members of the Greenville County Legislative Delegation regarding GHS’s governance. Some members of the Greenville County Legislative Delegation filed a lawsuit over GHS’ transformation into two separate nonprofit groups, the Strategic Coordinating Organization (SCO) and the Upstate Affiliate Organization (UAO). The UAO will handle day-to-day operations of GHS, and the SCO will guide the UAO. The state Supreme Court refused to take up the matter, but the issue is not entirely settled as the lawsuit is still pending in the Greenville County Court of Common Pleas.
GHS is “clearly disappointed” by McMaster’s decision, said spokeswoman Sandy Dees in a statement.
“As we’ve said before, taxpayers are absolutely not responsible or liable for repayment of these bonds, and there is no additional debt being incurred,” she said.
In a letter dated Dec. 29 to former GHS CEO Mike Riordan and Palmetto Health CEO Charles Beaman Jr., McMaster said that while the refinancing would provide savings, a key purpose is to transfer ownership of the bond debt to the newly formed SC Health Company.
“It is apparent that the issues and objections surrounding the restructuring of the GHS and [Palmetto Health] into a single entity, SC Health Company, need to be resolved within the home counties before spreading the responsibility for existing debt,” McMaster said in the letter.
“I should not approve refinancing and restructuring bonds that would make county facilities in Greenville and Oconee counties liable for [Palmetto Health] debt when there are strong objections from both the Greenville County Council and the Oconee County Council, as well as pending litigation,” he continued.
McMaster said GHS requested in October 2016 the reclassification of current bonds to maintain a tax-exempt status after the GHS board voted to change from a government-run health system to a nonprofit health system. Without reclassification, the bonds would have lost their tax-exempt status and cost GHS $167 million in financing fees, the governor’s letter said.
“However, this previous request was different from the current scenario, as the Greenville County Council supported reclassification of the bonds and the debt in question was not spread across a new entity when refinanced. Moreover, the purpose of the current request is to place all debt under the SC Health Company umbrella, creating one unified direction for GHS and [Palmetto Health]. Refinancing half of the debt does not meet this goal and is not necessary to maintain a tax-exempt status,” the governor said.