Phoebe-Palmyra buyout: A deal 25 years in the making

According to Wernick's affidavit, when he was hired to Phoebe in 1988, the former Authority chairman made purchasing Palmyra one of Wernick's top objectives

It was a purchase nearly 25 years in the making.

The former chairman of the Authority Harry Willson made purchasing Palmyra Medical Center one of Phoebe Putney Memorial Hospital CEO Joel Wernick's main objectives when Wernick was hired in 1988, according to documents filed in relation to a civil action between the Federal Trade Commission, Phoebe Putney Health System and the Hospital Authority of Albany-Dougherty County,

This week, attorneys for Phoebe and the Authority filed numerous documents going back to 1988, including an affidavit from Wernick and minutes from closed door meetings. These documents reveal the Authority made several attempts to purchase Palmyra over the last 23 years.

"At the time I was hired by the Authority in 1988, I was informed by the Authority that acquiring Palmyra was to be one of my objectives," Wernick states. He goes on to say in his affidavit that the reason for the interest in purchasing Palmyra was due to capacity constraints at Phoebe Putney Memorial Hospital.

The FTC and the state attorney general's office are currently suing to block the Authority's $195 million proposed purchase of Palmyra Medical Center from its parent company, the Hospital Corporation of America (HCA).

According to Wernick's affidavit, the Authority retained an attorney, Robert Baudino, in 1988 to assist with the possible acquisition of Palmyra, and between 1991 and 1992 â" a few years after a failed attempt at the purchase â" Baudino contacted the FTC about potential antitrust issues if they were to purchase Palmyra.

Wernick's affidavit says, in 1988, Baudino told him that HCA had three primary conditions for a sale of Palmyra: Absolute confidentiality until HCA agreed to public disclosure, the Authority agree to a reasonable purchase and service price, and there would be "acceptable or no antitrust issues that would prevent the timely consummation of the transaction."

After another failed attempt at negotiating the sale of Palmyra in 1998, Baudino formed the Sovereign Group in 2003 with former HCA executive Douglas Lewis. That same year, Wernick says in his affidavit that he and Baudino asked Lewis to initiate contact with Palmyra.

"Board leadership and I agreed that Mr. Lewis would be the right person to initiate contact with HCA given his prior relationships," states Wernick.

Negotiations began again with HCA about purchasing Palmyra in March 2004, but the Authority later found out that HCA was unwilling to sell

In the summer of 2010, Baudino and Wernick discussed contacting HCA again about selling Palmyra. Wernick states Lewis contacted HCA in late August 2010 and by Sept. 13 found out that HCA was willing to hear a proposal.

On Sept. 21, Wernick states he met with current Authority Chairman Ralph Rosenberg and Vice Chairman Dr. Chuck Lingle, and both men told Wernick to move forward with negotiations on the Authority's behalf. Rosenberg and Lingle both signed confidentiality agreements.

On Oct. 7, Wernick states he told the PPHS board that HCA might be willing to sell Palmyra. On Nov. 9, Baudino and Lewis delivered to PPHS a proposed written offer for the Authority to acquire Palmyra, and the offer was communicated to HCA on Nov. 16.

By Dec. 21, a special called meeting was held where Authority made its formal vote to approve the purchase of Palmyra.

On Feb. 14, 2011, the FTC began issuing subpoenas and CIDs in connection with its antitrust investigation of the proposed purchase of Palmyra by Phoebe Putney and the Authority, saying the acquisition would create a "virtual monopoly."