In a dramatic change of strategy, urine-testing firm Rennova Health said Tuesday that it has paid $1 million for a twice-shuttered hospital in rural Tennessee.
West Palm Beach-based Rennova said it will buy the 52,000-square-foot Scott County Hospital and an adjacent 6,300-square-foot building out of bankruptcy. The 25-bed hospital closed in June after its owner filed for Chapter 11 reorganization — and a previous owner closed the facility in 2012, according to the Tennesseean newspaper.
Rennova said it aims to reopen the hospital during the second quarter of 2017. Scott County (population 22,000) borders Kentucky and shares in the economic struggles common to Appalachia. Per capita income is just $18,709, and only 9 percent of residents have a bachelor’s degree, according to the U.S. Census.
“This acquisition is further demonstration of Rennova’s efforts to grow our business in a direction that will secure more predictable, recurring revenue for the provision of health care services and our state-of-the-art solutions,” Rennova Chief Executive Seamus Lagan said in a statement.
Times are so tough for urine-testing firm Rennova Health Inc. that the West Palm Beach-based recently sent an e-mail warning employees that they might not get paid on their scheduled payday. However, the crisis was averted, thanks to a preferred stock offering this month that raised $12 million. Rennova (Nasdaq: RNVA) had 144 employees as of Dec. 1, most of them in Palm Beach County.
“We’ve had a very difficult year,” Lagan said in an interview this month.
Most of Rennova’s revenue comes from its Medytox unit, which tests urine for drug-rehab centers. Tougher federal regulation has roiled the market, Lagan said.
“That picture changed very dramatically in the past year,” he said. “There has been a lot of fraud in that sector.”
For Rennova, 2016 has included a sharp drop in revenue, the resignations of the CFO and the chairman, a lawsuit from the landlord for unpaid rent at company headquarters in West Palm Beach, a 90 percent decline in the share price and a delisting notice from the Nasdaq.
Those struggles aside, Lagan said Rennova can remake itself into a hospital operator. Scott County Hospital had unaudited annual revenue of $12 million for 2015, he said, and Lagan lauded the hospital’s “predictable patient base.”
That includes money from emergency room visits, outpatient procedures, medical tests, physical therapy and inpatient stays.
Rennova will pay $600,000 in cash and assume a mortgage for $408,719, according to court filings. The hospital was operated by Pioneer Health Services Inc.