Q: Annual payments on a $30 million financing package will take lots of money. What are the sources of repayment for the $25 million to construct the hospital and the $5 million needed to provide operating money once HCA no longer operates the hospital ?
ANSWER: Part 1 to Paying for a new hospital — Profits.
Allen County Hospital is profitable as a Critical Access hospital. This is an important source of revenue to pay for a new hospital and to repay money borrowed to provide operating cash.
In three of the last four years the hospital produced profits exceeding 9 percent gross revenue. Gross revenue has exceeded $15 million. It is therefore reasonable to assume that $1.5 million could be available annually to retire a 30-year bond issue and pay back $5 million borrowed for 10 years for operating capital.
Over the 28 years Allen County Hospital has been leased by Research Hospital, Health Midwest and HCA, financial information on the operation of the hospital has been scanty. The leasing companies did not have to provide that information.
Only recently has enough information been provided to prove that current profits as a Critical Access hospital are adequate to provide a large part of money needed for debt repayment.
It will take $2,155,972 annually to pay off $25 million in Public Building Commission Bonds and a $5 million local bank loan. That annual payment would be required for the first 10 years. By then, however, the bank loan will have been repaid and the annual payment on the remaining bonds will drop by $631,894.
Our calculations are assuming 30-year bonds at a 4.5 percent interest rate.
After 10 years the bank loan is paid off and the required debt service funding drops to $1,534,788 in year 11 to retire the remainder of the bonds.
Parts 2 and 3 of our four-part “Paying for a new hospital” will explain the Medicare construction subsidy and the sales tax income. Part 4 reviews all of the income sources to show there should be more than enough revenue to build a new, well-equipped hospital and to provide operating funds for it.
Yes! Allen County Healthcare
