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St. Mary’s Health Systems has signed a letter of intent to manage the Scott County Hospital, it was announced Friday.

The Knoxville-based corporation issued a short, four-paragraph release Friday afternoon detailing its plan to assume management of the 99-bed, full-service facility from Attentus of Scott County, LLC, a wholly-owned subsidiary of Attentus Healthcare formed to manage the hospital.

Attentus is currently under contract with Scott County to manage the hospital. There has been unease among some local officials of late, however, with the expiration of that initial three-year lease period looming this winter.

Speaking to the Independent Herald Friday, Scott County Mayor Rick Keeton, who had been in discussions with representatives of both parties, said that there will be a 45-day due dilligence period, after which Scott County Commission must approve the transfer of the contract from Attentus to St. Mary’s. Certain other customary regulatory approvals must be obtained as well.

The anticipated date of transfer between the two corporations is written as “no later than January 1, 2008.” However, in the letter of intent, St. Mary’s CEO Debra London states that the anticipated closing date of the transfer is “on or before” November 30. Mayor Keeton anticipated that St. Mary’s “will endeavor to take over the hospital as soon as possible.”

According to the letter of intent, which was signed by London and Attentus of Scott County CEO Robert Hammond, St. Mary’s will acquire the hospital’s net working capital and all other equipment, “less those expenses incurred in relation to development of a new hospital facility.”

The letter of intent goes on to state that St. Mary’s will hire all of the hospital’s employees as of closing, with the exception of CEO Mark Cain, “in positions and at compensation levels generally consistent with those then being provided by Attentus.” Accrued vacation benefits and sick leave benefits of those employees will be honored by St. Mary’s, the document states.

According to Mayor Keeton, if the transfer of management is approved by all parties, the current contractual guidelines that Scott County has with Attentus, with the exception of language relating to the construction of a new hospital facility, will be assumed by St. Mary’s for an initial period of two years.

Lease on the hospital facility has been pre-paid through January. Beyond that date, St. Mary’s will pay Scott County $83,333 per month or $1 million per year — the same rate negotiated for Attentus.

“We believe this is a mutually beneficial partnership which allows St. Mary’s to meet the healthcare needs of the community,” London said. “We look forward to the opportunity to extend our healing ministry to the patients and families of Scott County.”

Attentus assumed management of the hospital from Community Health Systems in February 2005, after being chosen by County Commission in October 2004. At that time, St. Mary’s was the only other firm in the running with Attentus for the management of the hospital, out of some six firms originally submitting proposals.

The contract entered into with Scott County required Attentus to have constructed a new hospital or for a new hospital to be well underway by 2010, with automatic contract renewals of two years in 2008 and five years in 2010 to be granted provided sufficient progress in that direction was being made.

Fourteen months later, in April 2006, Attentus formally announced plans to pursue a new hospital, unveiling an artist’s rendering of what the new, 100,000-square-foot facility would look like. The facility was planned for a 20-acre tract at the intersection of Cook Avenue and Alberta Street in south Oneida.

Last November, the first public hint of trouble brewing in the contract with Attentus surfaced during an in-depth discussion of hospital matters by County Commission. In a review of Attentus’ first year of management of the hospital, Mayor Keeton stated that “They’re not making what they need to support a new hospital.”

Over the next several months, the hospital continued to dominate headlines from County Commission’s meetings, as commissioners wrangled with the question of whether to grant Attentus a long-term lease on the hospital — which Attentus officials were seeking — and whether to do so with or without a guarantee of when a new hospital would be constructed.

At a March meeting, Attentus officials told a special subcommittee of County Commission appointed to negotiate with the firm that they were not in financial position to build a new facility.

In a nutshell, Attentus’ position all along was that more time was needed to “grow the business” in order to convince its financial backers to provide funding for a new hospital.

All the while, rumors of Attentus selling out and questions of morale among hospital employees plagued the process.

Last month, County Commissioners requested Mayor Keeton to schedule a meeting with Attentus officials to determine their intentions as the initial three-year contract phase neared its end.

St. Mary’s owns and operates St. Mary’s Hospital in downtown Knoxville, its flagship facility. It also owns and operates the recently-opened St. Mary’s North in the northern section of Knox County.

St. Mary’s also operates St. Mary’s Jefferson Memorial Hospital in Jefferson City and St. Mary’s Medical Center of Campbell County in LaFollette.

St. Mary’s has also proposed a management contract with Woods Memorial Hospital in Etowah.