NATCHEZ — Citing declining revenues and liabilities that exceed assets by approximately $3 million, officials with Natchez Regional Medical Center announced plans Tuesday to file for Chapter 9 bankruptcy.

The decision was formally made Jan. 31 and discussed Tuesday morning with the Adams County Board of Supervisors, said the Rev. Leroy White, chairman of the hospital’s board of trustees.

“We have got to take the process we are now doing to make sure health care stays here, and (we) are not making this decision lightly,” he said. “We have struggled with these decisions over and over, and we met every week (in January) to pull all of this together.”

The county-owned hospital previously filed bankruptcy in February 2009 and exited the process in December of that year.

Members of the board of supervisors deferred comment to board president Darryl Grennell, who they said the board has agreed to be a spokesperson for the matter. Grennell could not be reached for comment Tuesday evening.

Before the bankruptcy process can move forward, the Mississippi Legislature has to approve and the governor needs to sign a special bill to allow it. The legislation being sent to the capitol is identical to the bill that allowed the hospital’s 2009 bankruptcy process, hospital attorney Walter Brown said.

Board of Supervisors Attorney Scott Slover said the length of the bankruptcy process would be subject to the will of the court.

“The timeline is to get started with the bankruptcy in the next few weeks, and I don’t think you can speculate further than that,” he said.

While the bankruptcy filing means that the county technically has to start the process of selling the hospital over again — a process under way since June — that doesn’t mean current negotiations with a potential buyer have to be discarded, Brown said.

“We are probably down to one (buyer), and if you want to know the truth, we are negotiating with that party now,” he said. “They have every reason to buy this hospital, and they have every reason to see it as a win-win deal. We are also talking to a non-profit teaching hospital we would hope is going to be a part of this collaborative effort for a hospital in Natchez. It is a win-win not only for the teaching hospital but for the new company coming in and a win-win for the people seeking health care in this community.”

A bankruptcy process might help move a sale along once a buyer is signed because the federal judge overseeing the case will set deadlines for when things have to happen, Brown said, adding bankruptcy will help any potential buyer have a clear title to the hospital.

“When you buy something out of bankruptcy, you don’t have Medicare and Medicaid problems,” he said. “Medicare can’t come back on that hospital for past deficiencies that might have happened in the past that they determined in 2014.”

The hospital’s decline in revenues was paired with a Recovery Asset Audit Contractor review in 2013 — known in the industry as a RAC audit — that cost the hospital $2.4 million in 2013, Brown said.

“During the RAC audit, several deficiencies were found, and when that happens the federal government holds back payments they might have otherwise paid you,” he said. “If you have a $300,000 bill and you send that in, they might only send you $200,000.”

Hospital Chief Executive Officer Donny Rentfro said RAC audit appeals are usually resolved in the favor of the hospital at a rate of 71 percent when they reach the third level of appeal, but that can take an average of 540 days that in the interim the hospital is not receiving the funds.

“The deficiencies aren’t related to the clinical care provided,” Rentfro said. “In our hospital, as in the vast majority of cases, it is a technical effort. The intent of a RAC audit is to reduce cost at the federal level, so if a physician’s signature was not appropriately dated and timed, that falls into the category of ‘fraud and abuse.’ The appropriate care was provided at the discretion of the physician, but by a minor technical mistake, it throws everything off.”

The RAC audit may not even reflect the current state of operations at the hospital, Rentfro said, as it looks at practices as far as three years back.

“We can certainly learn from what they find today, but they aren’t necessarily looking at what we are doing today,” he said. “They are looking back at three years.”

The RAC audit, the cost of converting to electronic medical record keeping and Medicare cut backs at the federal level created a unique year for the hospital in 2013, Brown said.

“When you have a hospital with a $44 million budget and you hope to break even, you are starting out in a hole,” Brown said.

During that time, the hospital used the funds garnered from its reported multi-million dollar 2012 lawsuit settlement with its former management company, Quorum Health Resources. NRMC sued QHR for $40 million on allegations of mismanagement that resulted in the 2009 bankruptcy.

The amount of the settlement was sealed in federal court at the request of the parties and has never been made public.

Since then it has been used to keep the hospital viable, Brown said.

“The settlement has been used to operate the hospital for the last year, without which we would have had this conversation a year ago,” he said. “It is what kept the doors open. It is what kept our creditors paid.”

Rentfro said the hospital administration will be discussing the situation with hospital employees this morning and addressing any concerns they may have, and he does not anticipate any significant change in staffing due to employees leaving or workforce reduction.

“We have been working on this for months, and we have been aggressively managing staff, balancing both high quality of care with the lowest cost way to provide that care possible,” he said. “We review every job opening with the strictest consideration before replacing or adding a position.”

Over recent years, the hospital has gone from more than 500 full-time employees to fewer than 300, even though some changes in the industry have mandated the creation of new positions, Rentfro said.

“That tells you the significant efforts we have placed on running efficiently,” Rentfro said. “There are always little opportunities here and there. We try to minimize the amount of overtime — for example — because that is a premium pay, and it is harder on the employees as well.”

The CEO said the hospital needs community support during this time.

“The way the hospital stays open is to keep it the way we left it today, busy,” he said. “There are still those bond payments we have to make.

“We need the local residents to be confident we are still continuing to provide a high level of care. With health care, you have to be confident the people you are entrusting with the care of your loved ones are competent, and we are. The trustees have been working hard, and they care, and the employees care.”