BLOUNT COUNTY, Tenn. — UPDATE (Sept. 22): Commissioners debated whether to move forward on the proposal to conduct a forensic audit of Blount Memorial Hospital's finances. The discussion began with concerns about how an audit would be paid for.
"Who would pay for those costs? Would those costs be incurred by the Blount County taxpayer?" said one commissioner.
The Blount County Budget and Accounting Director said it was too early to answer who would pay for it, and the county would need to work with the board of directors at Blount Memorial about paying for it.
An amendment was proposed to address issues related to expenses for a possible audit. Additional information about that amendment was not available.
"The cost of a forensic audit is very expensive," said another commissioner. "I do believe it is pretty common to say that a per-year forensic audit would be in the nature of hundreds of thousands of dollars per year."
That commissioner said he wanted evidence of impropriety before he would support the resolution. Mike Akard, another commissioner, said he believed comments from Blount Memorial alluded to impropriety. Akard said he supported the resolution.
The amended resolution passed 15-1 with two commissioners abstaining.
A separate proposal rejecting all pending nominations from the Blount Memorial Nominating Committee also passed on Thursday.
--
The Blount County Commission is considering whether to start an independent, forensic audit of Blount Memorial Hospital's finances.
Commissioners proposed a resolution to start the audit, saying BMH had an annual loss of more than $11 million. It also says Blount Memorial has been in default of its obligations with some bonds for the past 18 months, which could risk some of Blount County's assets, as well as its credit ranking.
The resolution also specifically says that Blount Memorial and all of its assets are "owned by the citizens of Blount County, Tennessee as created by private act in 1945."
The hospital's finances have been a sticking point in an ongoing controversy between the Blount County Commission and Blount Memorial Hospital. It accuses BMH of trying to sell assets outside of state laws.
In June 2022, Blount County leaders wrote a letter to the hospital's board of directors explaining their concerns over how the board was choosing its CEO. Blount County Mayor Ed Mitchell was one of the leaders who signed the letter. It said that the mayors felt the process of finding a new CEO did not strictly follow state law and hospital policies.
Then in November 2022, Mitchell sent another letter to the hospital saying he had "grave concerns" about how BMH is operated. In it, he said that BMH was appointed to operate the hospital on behalf of the county, but it never became the owner of any hospital assets.
Later in December 2022, BMH filed a lawsuit that asked for a ruling to allow BMH to proceed with plans to sell a facility in the Springbrook area for around $22.2 million. It was opened in 1996 and provided outpatient care, as well as other healthcare services, according to a press release from the hospital. According to the lawsuit, the sale was meant to "relieve its current financial strain."
In March 2023, the Blount County Commission approved talks between Mitchell and the University of Tennessee Medical Center about the future of the hospital. Talks about a merger between Blount Memorial Physicians Group and Covenant Health then started in April. Blount Memorial Physicians Group is a for-profit corporation, created in 2002, according to their state business record.
In May, Governor Bill Lee signed a bill into law that allows the Blount County Commission to change the management of the hospital. The county commission requested the law after controversy surrounding the sale of the Springbrook facility and the hospital's board members.
It amends a 1945 law, known as the Private Acts, which gave Blount County the authority to create a hospital. The act gave the Blount County Commission the authority to turn over operation and maintenance to a non-profit corporation.
The latest amendment to the Private Acts of 1945 says, "Any non-profit corporation selected to serve as the manager of the hospital should not be deemed the owner of any assets of the hospital."
BMH later filed another lawsuit against the county and the state, asking the court to say the amendment violates the Fifth Amendment and the Fourteenth Amendment of the U.S. Constitution.
It argues Blount Memorial's charter gives it the power to "purchase and hold or receive by gift, bequest or device, personal property and real estate, and also to accept any real estate or personal property in payment or in part payment of any debt due to the corporation and sell the same." It then argues that because of the charter and the Tennessee Nonprofit Corporation Act, Blount Memorial possesses the express power to own real and personal property.
It also said efforts by Blount Memorial to speak out against the law signed by Gov. Lee "was virtually ignored at every turn." After it passed, it said the county started looking for proposals to effectively replace Blount Memorial Inc. with a new manager, ending the 75-year relationship.
Blount Memorial also held a presentation on Monday discussing the hospital's criteria for identifying a buyer to purchase their Morningview Village property, a senior living center. In it, they said the transaction could provide some cash that would help them meet their bond obligations.
They also said the transaction would improve the county's bond rating and credit.
In the presentation, they said the Ocoee Foundation was considering buying the Morningview Village property for a total of around $24.4 million. The Ocoee Foundation is a nonprofit based in Cleveland, TN which owns and manages assisted living facilities.
The Blount County Commission will consider the resolution to start an audit into Blount Memorial's finances on Thursday, Sept. 21.