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E.J. Noble Hospital heads to court for approval of reorganization plan


CANTON — Representatives of E.J. Noble Hospital are to appear in state Supreme Court today to seek approval from Judge David R. Demarest for a reorganization plan that will allow the facility to emerge from insolvency and become Gouverneur Hospital.

“Petitioners urge the court to grant the relief requested in this petition so that the closing of the asset purchase agreement may occur by Dec. 31 or the face of healthcare in the Gouverneur community is likely to change forever for the worse,” the hospital’s attorneys argued in court documents filed with the St. Lawrence County clerk’s office.

The reorganization requires E.J. Noble to have a newly formed parent organization — St. Lawrence Health System — that would oversee its operations and those of Canton-Potsdam Hospital, Potsdam. Canton-Potsdam Hospital manages E.J. Noble.

The plan was put together because E.J. Noble and its affiliated Kinney Nursing Home are in a financial hole and because the state Department of Health was critical of the quality of care.

According to unaudited figures, E.J. Noble had a net operating loss of $4.3 million for the first 10 months of 2013 following operation in the red for many years. The hospital is projecting an operating loss of $900,000 for the fourth quarter of 2013.

Kinney Nursing Home also has financial woes and owed E.J. Noble $2.3 million as of Oct. 31. Its unaudited losses for the first 10 months of 2013 were $239,000. Dissolution of the nursing home has not been recommended by its board.

The plan is for E.J. Noble to buy the assets of Kinney Nursing Home in exchange for its debt. Gouverneur Hospital then will take over the assets of E.J. Noble.

E.J. Noble has been shored up by cash advances of $300,000 and $200,000 in January and August from Canton-Potsdam, a $5.3 million loan from the state Dormitory Authority and a $9.3 million state Healthcare Efficiency and Affordability Law grant that repaid the Dormitory Authority $3.8 million. The National Automatic Sprinkler Pension Fund, which holds the bonds on the hospital’s recent expansion project, received $4 million from the HEAL grant for partial payment of E.J. Noble’s obligations. The remainder of the $1.5 million HEAL money went toward E.J. Noble’s fourth quarter operating shortfalls.

As of Oct. 1, the principal on the bonds was nearly $11 million, with interest due of $333,225. In addition to the HEAL money, the pension fund received debt service reserve funds of nearly $1 million, reducing the principal to $6.3 million.

Canton-Potsdam will assign its interest in the asset purchase agreement to Gouverneur Hospital, which was incorporated Dec. 5.

As part of the reorganization, the pension fund will receive a base price of $2.5 million plus an amount up to $2.3 million to be determined by the asset purchase agreement. The hospital also may request it be allowed to give the pension fund $943,000 of restricted donor funds, although alternatives are being sought.

Other secured claims, including a $100,000 line of credit with Gouverneur Savings & Loan Association, and equipment leases also will be settled by the reorganization.

The hospital will have $396,000 available for E.J. Noble’s unsecured creditors, which are numerous. The distribution will be determined later by the court.

St. Lawrence Health is expected to lend Gouverneur Hospital up to $5 million to make it operational, with payback over the next 20 years.

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