STEELE MEMORIAL TO EXPAND 11-10-15 LMS
Preliminary steps have been taken towards a $6.5 million addition to the Steele Memorial Medical Center.
Monday, November 9, the Lemhi County Commissioners approved a Hospital Board request to proceed into the detail phase of the project. The motion to approve came after hearing from Bond Counsel Mike Stoddard of Hawley Troxell Attorneys and Counselors, acting Hospital Chief Executive Officer Abner King, Hospital Chief Financial Officer Jim Peterson and Jeffrey Fivecoat, Senior Vice President of Public Financing for Piper Jaffray and Company Investment Bank.
Money for the project will not come from local taxpayers.
The Boise based Hawley Troxell law firm set up the hospital bond election of 2002-03. Stoddard said the structure of this project will be different. The 2002 hospital bond was secured by property taxes. Financing for this debt will come through the Idaho Health Care Facilities Authority and legally cannot be paid for by Ad velorem [value of property] taxes. He said this debt can only be paid from hospital revenues. Stoddard said that if for any reason the hospital’s finances were such that they were not able to service this due debt the county would not be on the hook. “…in fact they are not allowed to use property tax revenue to repay the debt. The debt is secured solely by the revenues of the hospital and a long term lease of the hospital.” Stoddard said under the arrangement the county and the Hospital Board will lease the existing hospital to the Health Facility Authority which in turn borrows the money from its various financial sources, constructs the facility then leases it back to the county and the hospital. He said the lease structure was created by the Idaho legislature and approved by the Idaho Supreme Court in 1974. The process was created to avoid there being a mortgage on a health facility. If there is ever a default, which has never happened, the banks take over operation of the facility but can never sell it. When the debt is paid the facility reverts to the county and Hospital Board.
CFO Peterson said a bank has offered financing at a 3.1 percent fixed rate for the first ten years of a 15 year commitment on a 23 year amortization. King said payments the first ten years will be around $400,000 per year. Medicare reimbursement will pick up approximately half of that.
Requirements of the loan specify the hospital has to have enough cash on hand to operate for 60 days without incoming revenue. Steele Memorial has a 150 day cushion.
Fivecoat commented that he has worked with rural hospitals throughout the country. He said the 60 day cash on hand bank offer is good and is because of the strength of this hospital, its balance sheet and positive on-going operation. He also thinks the timing is right based on the current economic tea leaves and that having the ability to lock in the interest rate will look very good ten years down the road.
There is no penalty for early pay off and the Hospital Board has a goal of paying the total debt in ten years.
Commissioner Rick Snyder is an Ex-Officio Hospital Board member and he said the expansion idea has been discussed for years. He said when Leadore was recently “Capitol for a Day,” Governor C.L. “Butch” Otter was encouraged by the fact the proposed facility would enable more local treatment for Lemhi County residents in addition to generating more revenue for the hospital. Snyder also said this transaction is based on current hospital revenues which could increase when additional specialty services are added. He said that last month the hospital’s gross revenue was $3.4 million.
King said the Medical Center has expanded as much as it can with the recent acquisition of the adjacent former law office building which is now occupied by examination rooms and nurses stations. He said the main reason for the need to expand is the growing number of specialty services being offered and the number of visiting physicians coming in to administer those services. Specialty services include Cardiology, Urology, Ear, Nose and Throat and Dermatology. King said they are also offering general surgery and orthopedic surgery. He said the only space currently available is a three-exam-room clinic located in the hospital and scheduling those rooms has become quite a juggling act now that Urology wants to expand services from the present three days to four days a month.
King said more room is needed in order to bring in other medical specialties that will make it unnecessary for residents to leave the area for medical needs. . He said there were over 2,100 specialty visits last year not counting orthopedic and general surgeries. Peterson added that number represents a 20 percent increase from the previous year.
The new 17,800 square foot medical office building would house Family Practice Services and the specialty services which will free the existing facility plus allow for future growth. Approximately 3,000 square feet of the new structure will be used for conference rooms and 14,000 square feet for clinic space. The building will adjoin the existing clinic and extend towards the hospital.
On October 22 the Hospital Board passed a resolution to go forward on the financing project and with Monday’s preliminary first-step approval from the commissioners the hospital will now move into the detailed design phase which is expected to take about five months. At that point the plans will be brought before the county Board of Commissioners for a final approval. If all goes well ground could be broken as early as April with a goal of getting enough of the building completed so that it will be ready for interior finish work by cold weather. The targeted move-in date is February or March of 2017.
Payments on the current hospital bond, which has $6,855,000 left owing, will not be affected by the new revenue based debt.
Want the latest headlines as soon as they are added?
Check out our new News Alert subscription service.
Table of Contents - - New Articles
Leslie Shumate Home Page - View Our Home Town - Salmon Valley Chamber