Utilities and Government

Auction company packing up Winona: Closed hospital has potential buyer, attorney tells court Getting organized

March 7, 2005

"That's to keep the spirits away, make 'em happy," Brian Hayes explained as he turned past the blaring radio.

Auctioneers and the occasional unexplained phenomenon have taken over Winona, as the closed hospital nears an April auction date for its remaining equipment. Hayes, of San Francisco-based Rabin Worldwide Inc., has piled up seven-day workweeks since early February cataloging and organizing the defunct hospital's assets.

All that work may go for naught, however, if the auction proposal dies in bankruptcy court or if recent interest in the building turns into a purchase offer.

Rows and rows of wheelchairs and scales crowd a first-floor lobby of the near-northside hospital. Most wear black-and-white Rabin Worldwide stickers with numbers written on them.

Crutches shrink-wrapped in plastic lie nearby. Dozens of crash carts and their defibrillators also stand ready for the highest bidder.

Rabin plans to sell all this and much, much more at an auction tentatively scheduled for the week of April 11 at the Hilton Indianapolis hotel on West Market Street. The silent auction will run for three days and be broadcast simultaneously on Rabin's Web site, said Drew Hynes, a Rabin representative in San Francisco.

That means Winona beds, clamps or retractors could wind up at another Indianapolis hospital or they might move to Asia to help with tsunami recovery. It all depends on the buyer.

But before any items sell, they must be photographed and inventoried. That's what Hayes and some assistants have been doing for 10 to 12 hours every day since early February.

Late last month, their handiwork was on display throughout the building. On one floor, piles of tan phones sat on plastic shelves, their cords wrapped around them.

Boxes and rolls of packing tape piled up at an empty nurses' station, where someone wrote "We Will Miss You!" on the marker board.

On the second floor, Hayes' mother and sister sorted through metal trays loaded with surgical instruments. He said he asked his sister, a registered nurse, to drive up from Tennessee for the day to help identify things.

Hayes and the handful of people working with him claim two ghosts-a mother and daughter who lived nearby and died at the hospital-keep them company while all this sorting takes place.

The spirits are angry at the closing-or so the story goes.

Hayes said he and his co-workers made up the ghosts to explain strange happenings like a clock that kept falling off a patient room wall despite being fastened securely with a hook.

"Your imagination can play tricks on you when you're on one of these floors all by yourself, and it's overcast outside and half the electricity's out," Hayes said.

He also let his imagination wander in what might have been an anesthesia recovery room, also on the second floor. There, he lined up a couple rows of patient beds and placed CPR training dummies in them, each carefully tucked under a blanket.

"You've gotta have a little fun," he explained as he walked through the room.

Six dummy babies in matching outfits filled a crib. Hayes tastefully left covered some alarmingly realistic dummy torsos used to simulate baby delivery or-on the male version-catheter insertion.

The Rabin representative said he has plenty of work left on other floors. Boxes of Yahtzee, checkers and other games and toys await his organizational efforts in the fifth-floor behavioral health services unit.

"Seasoned Seniors Are Sensational!" reads the poster that greets visitors as they leave the elevator on that floor.

Hayes plans to finish work at the hospital later this month. That's also when Winona representatives could learn in bankruptcy court whether the auction will actually take place.

Winona closed last September, shortly after creditors filed an involuntary petition for Chapter 7 bankruptcy against the hospital.

Months of mounting financial problems led to the filing. The hospital struggled with unstable ownership, supply problems, low patient counts and poor reimbursement from government programs like Medicaid and Medicare.

A group of doctors who practiced there bought Winona last May from Texasbased Leland Medical Centers Inc., but they could not revive it.

By then, the 48-year-old hospital had piled up millions in debt.

The proposed auction is one of the latest attempts to chip away at this debt. Paul Gresk, the Chapter 7 trustee in the case, filed a motion last month in U.S. Bankruptcy Court to arrange the asset sale.

Rabin, which asked to get started organizing the hospital even though the auction may fall through, guarantees the sale will bring in no less than $810,000. The auction company will take a 10-percent cut; the estate will receive at least $60,000 or more depending on how much sells; and General Electric Capital Corp., a Winona creditor, will receive most of the rest.

Money the estate receives will go toward administrative expenses like lawyer and accountant fees. Beyond that, attorneys representing the estate want to pay priority claims like hospital employees who did not receive their final paychecks.

"We're hopeful we'll have some money to pay the employees, but we don't know," said Joe Murphy, an attorney working with Gresk.

The auction's prognosis looks grim. Winona's largest creditor, New Jerseybased Healthcare Business Credit Corp., opposes it.

HBCC holds the largest lien on the property and has taken the lead role in trying to sell the hospital building. Any potential buyer would rather purchase a hospital stocked with equipment than an empty building, HBCC argued in an objection filed in bankruptcy court.

"It is almost self-evident that the sale of the assets together with the hospital would maximize the value of both, and thus generate additional funds for the Estate," the objection states.

HBCC also argues that it, and not General Electric Capital, should have first priority over most of the assets to be sold.

A possible buyer also could stop the auction. An interested party surfaced recently, attorney Jeffrey Hester told U.S. Bankruptcy Judge James K. Coachys during a Feb. 25 court appearance. That buyer might want the hospital with the equipment.

Hester, who represents the trustee, asked the judge to postpone a hearing on the auction so they could explore that opportunity. The judge agreed and pushed the hearing back to March 25.

Lawyers involved in the case said they could receive a written purchase offer in the next week or so if the buyer is serious. They declined to elaborate after the court appearance.

Interest in the hospital is nothing new. Court records show a few potential buyers talked with hospital officials shortly after Winona closed. In late September, Winona representatives met with representatives from The Children's Museum of Indianapolis to talk about a possible deal.

Museum President and CEO Jeff Patchen said the hospital approached them. The museum is just south of Winona on North Meridian Street and it had considered buying part of the hospital a few years ago.

This time, the conversation was brief and the museum said, "Thanks, but no thanks," according to Patchen.

Last November, Hester told Coachys some "very serious parties" had checked out the hospital. But a written offer never materialized.

HBCC has literally paid to keep the lights on at Winona while it tries to sell the building.

The company covers utilities and pays for security guards and an employee to handle patient records. Gresk said one of his main priorities is figuring out what to do with those medical records.

"We've got records of 60,000 patients going back 10 years," he said.

Murphy said there are no guarantees a new owner for the building would accept responsibility for them, and the bankrupt estate has no money to pay someone to keep them.

"It may be a situation where we run an ad in the paper and tell people, 'Come pick up your records,'" he said, describing that as a worst-case scenario.

HBCC provides only a temporary solution for the records. Gresk and Murphy want to find a permanent home for them. They filed a complaint March 1 asking the bankruptcy court for help straightening out the matter.
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