Focus Turns to Future

Forum covers public concerns, debt, future plans at HMC

The following article was printed in the Nov. 22, 2019 edition of The Northeast Georgian. To see the original publication, scroll down to the bottom of the page.

BY ERIC PEREIRA

Habersham County has an outstanding bond debt of approximately $37 million related to past projects at Habersham Medical Center. Hospital officials hope that a financial partnership with Northeast Georgia Health System will help lessen that burden.

Leading representatives of HMC hosted a public information forum Monday at the HMC West Wing Classroom. The purpose of this forum was to discuss the current NGHS/HMC affiliation and potential future transaction.

Representatives from NGHS also attended to discuss their future plans and provide clarity.

The transaction is based off a five-year plan for NGHS to invest $3 million annually, specifically in capital projects. HMC CEO Lynn Boggs said this is an agreement between the Hospital Authority of Habersham County and the Hospital Authority of Hall County and the city of Gainesville.

The forum provided more context over strategy and decision making for this agreement. Some pros and cons were provided as well as for what is anticipated at the end of the five-year mark.

Habersham County’s $37 million debt was stated in an executive summary given to forum attendees. “This debt is paid through tax revenues. HMC, as with many rural hospitals across the country, now requires additional financial support to maintain the facilities and ensure continued access to local services,” it reads. “HMC does not have sufficient financial assets to obtain approval for additional external financing.”

Through these capital improvements, HMC plans to increase its revenue and grow day’s cash-on-hand to 20 days on average. “Using these designated savings to pay down the county debt will reduce taxpayer burden to fund the county bond debt when the purchase is finalized. The goal is to save up to $24 million to pay down to county debt.”

So with this plan laid out, a transaction can happen under two circumstances to which HMC becomes a part of NGHS, specifically Northeast Georgia Medical Center.

“After five years or an accumulated County savings of $18-$24 million, Hall County is obligated to acquire HMC for the value of the funds invested ($15 million),” a PowerPoint slide reads. “If the County Savings Account reaches $24 million prior to five years, this automatically triggers an earlier transaction.”

Hall County Hospital Authority has the “option to acquire” HMC if the accumulated funds are less than $18 million.

Hall County Hospital Authority would have to notify HMC within 90 days on their decision.

PROJECTIONS AND STRATEGY

HMC’s recent driving down of expenses by $3.5 million and work on revenue cycles meant the operational problems were taken care of.

So Boggs said the next plan for HMC leaders was strategy. To which she said the obvious answer was an affiliate.

Following through with the deal with NGMC’s investment will increase the ending cash balance for Fiscal Year 2020.

“This is going to pull us out of that slump and it’s going to make us a viable hospital for this county and eventually as part of Northeast Georgia Medical Center,” Boggs said.

Referring to a summary balance sheet as of June 2019, Boggs pointed out that HMC was facing total assets of $38 million and $48 million in liabilities, giving a negative equity position of $10 million.

This further emphasized why HMC had to seek a solution and not become the next rural hospital in Georgia to close.

SEPARATE ENTITIES

Boggs stated that HMC and NGMC will remain separate legal entities during this five-year period.

“A lot of folks have come to us to say, ‘Oh, you’re part of Northeast Georgia Medical Center.’ We’re not.” she said.

“Our plan is to become part of Northeast Georgia Medical Center, today we are separate entities.”

PROS AND CONS

The benefits reported by Boggs are access to local healthcare services, healthcare services within a system of care at all levels of severity and specialty needed and a continued “economic engine.”

It was pointed out that HMC had an $86 million economic impact in its 2017 report.

Some adverse outcomes listed were that there would be some loss of local control for healthcare operations and services decision after the merger and the bond debt payoff amount would be dependent on cash accumulated in the County Savings Account.

QUESTIONS FROM THE AUDIENCE

“What if North Georgia Medical Center would come in and take the assets with no payment?” asked Bob Gutherie. He said that it appears there is no purchase price and was also worried about projections running negative, thus possibly incurring more debt.

“The possibility does exist that as we project our growth and our additional revenue, it doesn’t happen as we project to your point of … we think we’re going to accrue $24 million over five years. There’s a possibility that it will be something less than that, it could actually be something more than that,” Boggs said. “Until we navigate this, we’re not going to know for sure until we get to the end of that five years. So that is a possibility. As to the payment, Northeast Georgia Medical Center is contributing $3 million a year for five years … that is a payment.”

Gutherie also worried about once NGMC takes over, they are not required to operate as a hospital.

NGHS Chief Strategy Officer Tracy Vardeman and Sean Couch, NGHS director of public relations and Marketing, spoke on NGHS’s intent and focused on how important HMC is to the county and NGMC’s operations.

“To your point, no requirement, but we would hope our past performance demonstrates that we’re here to help this community long term,” Couch said referring to a previous partnership with Lumpkin County.

This led to a discussion of how on HMC should currently care for lower acuity patients, while NGMC is more suited for high acuity patients.

The Gainesville hospital already cares for many patients from Habersham County, according to Couch.

Closing HMC’s doors would lead to longer waits for patients at NGMC, among other other things.

“It can’t be understated, this arrangement will either succeed or it will fail based largely on how much this community uses this hospital,” Couch said. “That’s the whole key of how it’s set up and established.”

EXPECTED CAMPUS CHANGES

Seth Heringer asked what are the plans for the $15 million. Boggs said the first initiative is adding more beds for increased capacity. The plan is to build a new rehab center at the back of the campus for physical and cardiac therapy and the orthopedic practice.

Habersham Home West would be remodeled to fit more beds while Habersham Home East would be renovated in order to house observation patients who stay for 24-48 hours.

As mentioned during the beginning of the meeting, upgrading HMC’s IT platform is among the list of priorities for capital investments.

Chief Financial Officer Steve Ciampa mentioned a wish list from managers for capital equipment upgrades that already exceeds $6 million.