Hospital seeks county bond approval

With its eyes firmly set on bringing an ambulatory surgery center to Memorial Hospital of Sweetwater County, the hospital’s board of trustees presented their proposal to the Sweetwater County commissioners Tuesday.

The commissioners are needed to sign off on the use of revenue bonds, which the hospital seeks to use in paying for the $40 million project because the county owns MHSC. Irene Richardson, chief financial officer for the hospital, said taxpayers would not be affected by a potential bond issue.

Unlike bonds used to build the hospital’s medical office building, they won’t be paid for through sales tax collection, but will be paid using revenue generated by the hospital.

Because MHSC has a BBB rating with Standard and Poor’s, the hospital is able to sell construction bonds at a lower interest rate than utilizing a bank’s letter of credit, which the hospital used in its 2007 building renovation.

“That’s the beauty of having a BBB rating,” Richardson said.

With other costs associated with the project beyond construction, the amount needed in bond revenue would come closer to approximately $50 million, according to William Douglas, director of public finance, healthcare for Wells Fargo Securities in Denver.

With a private hospital currently under construction, some question remains about how that will effect MHSC. Conservative projections used in calculating the hospital’s projected revenue show the hospital may see increased revenue through 2020, but financial analysts working with the hospital admit the private hospital represents an unknown in how and if it will effect hospital revenues.

“I am concerned that shift is enough to throw the apple cart off ... because there are so many unknowns,” Commissioner John Kolb said.

While competition with an incoming private hospital is one of the hospital’s reasons for building a surgery center, meeting the needs patients have throughout the county is also a driving force behind the request. Dr. Grant Chrisensen, the board’s treasurer, said surgery centers similar to the one proposed by MHSC are become a part of nearly every community and opens up new possibilities for the hospital, as well as bring revenue into MHSC.

“It makes good sense to have surgeons in a surgery center,” Christensen said.

Some of the county commissioners are a little cautious about the proposal however. Commissioner Wally Johnson said he doesn’t want to see a situation where the county is forced to sell MHSC because the hospital was unable to pay off its bonds through its revenue. Johnson, who worked for U.S. Steel in Lander said a new hospital was built shortly before the company shut down its operations.

The hospital was unable to recover from economic blow to the town, which Johnson said resulted in the hospital’s sale to a private group.

Richardson said the hospital is extremely unlikely to default on the bonds. The hospital currently has 128 days of cash on hand in its coffers while it’s only required to have 75 day of cash on hand. Also, a part of the bond issue would require the hospital to set aside money to cover one year’s worth of bond payments, which would come from the bonds themselves. She said other provisions would be in place to help the hospital avoid default if revenue severely dipped.

During a study of the last seven months operations, the hospital has generated revenue at a time its projections suggested it would operate at a loss. The projected loss comes from bringing its medical office building online, which also entailed bringing additional medical professionals into the building to build practices around MHSC’s new services.

While a decision to approve was tabled to allow additional public comment at the commissioners’ next meeting, the hospital board believes the surgery center will help improve the hospital.

“We feel we want to be the best hospital in the state,” Christensen said.