HCH requests $8M for debt assistance
November 24, 2010
Like many county hospitals throughout the country, Harrison County Hospital in Corydon has found it difficult in the battered financial climate to find banks willing to back its debt. Because HCH's financial backer, Chase Bank, decided only to renew the letter-of-credit agreement on a one-year basis and to significantly increase the yearly payment, HCH representatives Monday evening, Nov. 15, visited the Harrison County Board of Commissioners to request $8 million to help buy down the hospital's debt.
The board took the initial steps to do so, by agreeing to pursue an agreement which would see the payment made out of the community fund of the Harrison County Community Foundation. The fund would be replenished as riverboat gaming funds are received. The agreement will be similar to the one used to help fund the old hospital-government center project, which required $9 million from the community fund.
Commissioner Carl (Buck) Mathes made the motion to send the request on to the county council and the HCCF board of directors; Commissioner Terry Miller seconded (Commissioner chair James Goldman was absent).
The $8 million, plus another $8 million from hospital cash reserves, will bring the debt from $28 million to $12 million, which is a figure local banks will work with.
The topic, along with a couple of fire department bids, drew quite a crowd at the board's second regular meeting of the month. Extra chairs had to be brought in to accommodate attendees.
Jerimi J. Ullom, attorney with Hall Render Killian Heath and Lyman, based in Indianapolis, said prior to the financial crisis of 2008, the type of financing HCH secured was typical. Since then, however, he said things have changed with banks.
"Now, unfortunately, it's affecting the hospital," he said. "Banks are less and less willing to renew them (letters of credit)."
Ullom said he has worked with a lot of county hospitals in the last two years dealing with this situation.
The increase in yearly payment to Chase was the bank's way of encouraging the hospital to find another solution, Ullom said. Chase raised the letter of credit fee by approximately $450,000 per year, for a total of $1.6 million.
"It's like having a sword hung over your head," Jeff Davis, HCH's chief financial officer, said.
Davis made it clear that the hospital has not defaulted on any payments with Chase.
Steve Taylor, the hospital's chief executive officer, described the financial market change since 2008 as "incredible."
He said if the hospital can get the debt down to a manageable level, it probably wouldn't need the backing of the county.
"The key is to get our debt down," he said.
Taylor concluded by saying that the hospital plans to continue to grow and be one of the major employers in the county; he then asked the county to provide financial support.
Davis said another reason debt continues to climb is that the number of underinsured and uninsured patients has continued to rise, along with the number of Medicaid patients.
"Medicaid is almost as bad as uninsured," he said.
The hospital gets paid about 15 cents to every $1 back for Medicaid patients.
He also said people have deferred care, such as putting off a surgery.
"We're just being paid less for what we're doing," Davis said.
Davis said he'd like to get the $8 million appropriation approved by the end of the year. "The sooner the better," he said.
The council was to hear the request at its meeting Monday night.