NEWS - Health & Hospitals

By Lou Phelps

Jan 30, 2012 - The Memorial Hospital board of directors agreed Wednesday night to agree to change their By-Laws, and provide the Chatham County Commissioners with the power to appoint four of the hospital’s 17-member board of directors, if the Commissioners will agree to guarantee $250 million of the hospitals’ debt.

County officials have stipulated the requirement as part of its terms to guarantee the hospital system’s debt, now under consideration by the Chatham County Commissioners.

Chatham County owns all of Memorial Hospital’s buildings and its land (except for The Provident building), assets that are overseen by the Chatham County Hospital Authority, appointed by Chatham County Commissioners. But Memorial Hospital, for years, has been the guarantor of those loans, and makes all loan payments. No County tax funds are used.   

Lenders have required strict financial covenants, such as insuring that the hospital has 90 days operating cash on hand, because of the troubled financial results of the hospital over the past ten years, including a reported loss of more than $16 million in 2010.  The financial picture has also meant that Memorial has been unable to refinance the loans, or secure additional borrowing for needed capital improvements and expansion.   

Sometime this Fall, the Memorial Hospital Board of Directors voted to ask the Chatham County Hospital Authority to change the methodology – to ask the County to guarantee the loans versus the Hospital Authority.  There is no public record of the topic on the Memorial board agendas, however, and it does not appear in the Board’s published minutes. The Hospital Authority voted in public, according to their minutes, to make the request on October 5, 2012.  (See related story: Jan 30 - CEN Asks Memorial to Review Open Meeting Law Procedures.)

And, the Chatham County Commissioners discussed the topic in public at their December 12 meeting, though they have deferred any discussion to date on the advice of County Attorney Jonathan Hart. 

Hart has advised the Commissioners to more fully understand the implications to the County’s bond rating if they take on the Memorial debt in light of other significant financial obligations the County potentially has ahead.  These include possibly guaranteeing loans for a new hotel on Hutchinson Island, and absorbing the operating costs of the new County jail now under construction.   

Memorial’s covenants are choking, in their opinion, including a requirement to have 90 days of cash in reserve, a savings account in effect, according to Maggie Gill, current CEO of the hospital, and previously Memorial’s CFO for several years. . Memorial has never missed a bond payment

If the Chatham County Commissioners agree to guarantee Memorial’s loans, the hospital will not have to keep as much cash on reserve.  “There will still be a certain level of covenant requirements, but lower,” explained Curtis Lewis after the board’s meeting on Weds. Jan 25.

He estimates that they hospital would be able to free up “from $10 to $20 million in cash that could be used for needed capital improvements,” Lewis explained.  Memorial’s emergency room, for example, was built to handle 44,000 patients a year, but last year saw over 96,000.  And, the hospital’s security system for both the staff and patients is not up to standard.  The hospitals weak financial history has prevented them from securing additional borrowing for needed improvements.

What Memorial is seeking is analogous to the community banking crisis and tightening Federal banking regulations. Community banks are upset that banking regulators are requiring them to have better management practices and keep more money on reserve to weather failed loans, which restricts their loan activities.  But many consumers would agree with the changes in light of  the large number of Georgia bank failures.