Hospital financial troubles grow more serious

Hospital looking to state for help, but lenders pushing for changes.

Judging by the report Grays Harbor Community Hospital District commissioners heard this week, the hospital’s financial problems are only becoming more dire.

Income is down and expenses are up. The district lost a little more than $2 million in November. December’s financials aren’t ready but are likely to show a loss of about $750,000 and a previous projection predicts a $3.6 million loss for the year. There was a $3 million loss in 2016.

Lenders are asking for their money or assurances that the hospital will take steps to stabilize things, and payments to vendors are being delayed.

The district is going back to the state Legislature and governor’s office to ask for help climbing out of the hole. Just a few years ago, the state helped out by increasing the rate at which it reimburses the hospital district for treating Medicaid patients. One of the contingencies for that help was conversion to a public hospital district from the previous status of private, not-profit.

“It does look bleak,” hospital board Chairwoman Maryann Welch said. “I’m heartened right now that there are some strategies being pursued. … Rural hospitals will always struggle. It would be great to see something happen from the state standpoint to get reimbursed more closely to our cost for serving Medicaid patients. Right now we’re serving them at the risk of our hospital.”

Typically, patients with private insurance are the most lucrative for the hospital, then Medicare and then Medicaid, which the hospital says is a money loser. Private pay insurance patients are in the minority at the hospital.

“Most organizations like us don’t serve a population that’s 35 percent Medicaid patients and survive, and our legislators understand that,” said hospital CEO Tom Jensen.

Jensen said he has visited with legislators and will do so again next week.

State Rep. Steve Tharinger, D-Dungeness, is on the House Health and Wellness Committee. “We want to help, we’re just not clear what the pathway is right now,” he said.

Asked about higher reimbursement rates for Medicaid care, Tharinger said it’s possible, “but if you start looking around the state, other (communities) are facing the same challenges and our budget is not so robust that we can just put a ton of money into higher reimbursement rates. We can look at maybe some bridge funding, but the system long-term has some real challenges. We’re very concerned about losing a hospital in Grays Harbor. Some folks can go to Olympia for care, but other folks — up the coast or in more rural parts — this is where they get medical services.

“… I’m pretty confident we’ll come up with something, I’m just not sure how robust or when.”

Rep. Brian Blake, D-Aberdeen, is also working with the hospital. “We’re scrambling to figure out what we can do, whether it’s bridge funding and see if we can get them a better business plan … we don’t have anything concrete.”

The board has a three-member Finance Committee. Its meetings are not open to the public because with a seven-member board, the makeup stays under what would be considered a quorum and trigger open meetings.

Minutes from the finance meetings are given to board members at the monthly meeting. Minutes from the December meeting indicate that in July a bank lender said it would not renew a $3.5 million line of credit. After initially saying it wouldn’t ask the hospital to immediately pay what was owed, the bank now says that because of the district’s financial condition and the fact that the hospital didn’t get a U.S. Department of Agriculture loan it was hoping for, the bank now wants payment.

The report says the bank may not require an immediate pay-off if:

– The hospital uses a consultant and considers another hospital system affiliating with the hospital or purchasing it.

– The hospital retains a consultant to assess the Harbor Medical Group, a subsidiary of the hospital that consists of a group of physicians and clinics, some offering specialty care. The assessment would look at how the group was run financially and operationally, with recommendations submitted to the board. A possible recommendation may be to “change how providers do their work, which is a challenging conversation for board members to hold with providers.”

– A meeting is convened with Key Bank, the board, administration and the bond insurer to discuss every party’s role and responsibility in making the hospital more financially stable.

The report noted that an assessment was recently done on Harbor Medical Group and the hospital has a draft report.

Hospital commissioner Miles Longenbaugh said last week that “it’s important to realize that (the financial problems are) not impacting the quality of the care. Ultimately, people want quality care when they go to the hospital and that’s not being compromised.”

The minutes from the December finance meeting say the district has the option to issue $38 million in limited tax general obligation bonds, which is as much as it could issue under state law. That could be used to pay off existing debt, but wouldn’t leave much left over, according to the financial report.

The report noted that the bank could call in a $30 million debt immediately, which would likely trigger a bankruptcy.

“Ultimately, the options are down to the hospital either quickly trying to secure an LTGO (limited tax general obligation bond) to pay off the loan, or to work through the bank recommendations … time is of the essence either way,” the board minutes indicate.