St. Charles Parish Hospital representatives got a $5.5 million line of credit for 11 years at Monday’s council meeting, but only after a near hour-long grilling over why they needed more help less than a year after getting a $10 million loan.
“We’re trying to take this $5.5 million and put it into operations,” said John Landry III, hospital board chairman. “Have enough trust in us as a board. This is not a lot of money, and we thought this through carefully.”
Landry asked the council to consider recent hospital successes with expansions in services such as cardiology and infrastructure, such as the $15.5 million, 72,000-square-foot medical complex under construction in Destrehan.
Buddy Boe, the parish’s chief administrative officer, said the measure, along with the hospital’s request to reissue $7.7 million in bonds to basically refinance existing bonds at a lower interest rate, were both aimed at facilitating the hospital’s partnership with Ochsner announced last year.
Both measures passed, but council members Jarvis Lewis and Paul Hogan opposed the credit line proposal. Hogan asked to table it to allow more time to review it, saying he wasn’t aware the credit line was for 11 years or that it would require an $870,000 payment per year, which he interpreted as “digging the hole deeper” on debt.
The council, as governmental authority and creator of the hospital district, has the authority to control hospital debt. The public-owned, not-for-profit hospital is a 59-bed acute care facility in Luling established in 1959.
Ritchie Dupre, system vice president of partnerships for Ochsner Health System, told the council Ochsner would guarantee payment of the $5.5 million working capital loan, which is aimed at addressing cash flow issues inherent to rural hospitals like St. Charles Hospital.
Dupre also clarified the resolution would not change the hospital-Ochsner partnership.
Overall, he said both proposals would be “important to the system’s financial health.”
But Councilwoman Julia Fisher-Perrier, as well as other council members, asked for specifics about the bond resolutions.
Boe said parish officials recently met with Ochsner representatives and support both of them.But Lewis said last year’s $10 million loan backed by money from a 2.48-mill property tax that voters renewed plus the $5.5 million credit line would bring council support to more than $15 million.
“Why we asking for so much more money?” Lewis said.St. Charles Parish Hospital CEO Fred Martinez said last year’s loan covered $3.5 million to refund and refinance existing debt with the remaining $6 million used for needs such as capital improvements.
Martinez said the hospital has been dealing with costly changes in Medicaid reimbursements, as well as state funding. Also, the hospital has to contend with the cost of having to provide emergency room care to anyone regardless of ability to pay and then has to wait for reimbursements.
“This is a transitional year for us as we enter the relationship with Ochsner,” he said. “We need the credit line to avoid problems with cash flow.”
Martinez added, “People forget that we’re an ongoing concern. There will always be a need for capital.”
He said the hospital is asking for a longer payback time to facilitate Ochsner management and expand services.But Lewis replied, as a business, the goal is to make a profit, but when that doesn’t happen other options should be considered.
Martinez agreed.
But he also emphasized the hospital has a good bond rating of “A Stable” with Standard & Poor’s, which is a healthy rating, and the bonds have always sold as “AAA.” Also, he said the line of credit with Ochsner backing would facilitate better terms with the bank, as well as improving services.
Fisher-Perrier said she understood the hospital is not-for-profit, but that “it shouldn’t be a black hole either.” She also asked why the council got an itemized list of expenditures with last year’s loan request, but no list this time.
Martinez emphasized the credit line was aimed at facilitating change with Ochsner.
“We felt it was time to become part of a larger system,” he said. “The industry is changing, particularly on the business side. We’re trying to make sure our hospital is here for generations to come.”
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