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Posted: Monday, October 21st 2013 at 11:43pm

Habersham Medical Center finances described as 'untenable'

By Rob Moore Editor
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Hospital Authority of Habersham County Chairman David Kerby provides an update on Habersham Medical Center's financial situation. (Photo/Rob Moore)
CLARKESVILLE - The Habersham County Commission took steps Monday night to make sure it can back financially-challenged Habersham Medical Center.

In his report to the commission, Hospital Authority of Habersham County Chairman David Kerby shared with commissioners some of the financial struggles faced by the hospital.

"The hospital completed its annual audit and our auditors gave us a clean audit, but that doesn't mean that everything's good," Kerby said. "Their conclusion was that the financial situation of the hospital is untenable and that it cannot stay operating in the financial situation it's in now for an extended period of time. Hence, our working with Northeast Georgia Medical Center with some sort of alliance where we can share expenses and streamline some of our operations."

Kerby explained some of the challenges hospital management faces in achieving institutional financial goals.

"Some of our problems stem from reimbursements being down," Kerby said.

"That is payments that we receive from second- and third-party insurers such as Medicare," Kerby said. "For example, we're down because utilization was down. That's driven by several factors. One is the unemployment, which we just heard - they're a lot of people in dire financial straits that can't afford treatment; and, two, the Center for Medicare Service has decreased the amount they allow us to charge for certain things, and under some circumstances they can even take the money back."

Additionally, lower salaries than in other locations results in employees leaving frequently.

"Our employees' salaries are lower than average for the jobs and so consequently we have some high turnover, which again adds to your costs," Kerby said. "So we're looking for ways to mitigate our turnover."

During an added agenda item during the new business portion of the meeting, the commission voted to approve seeking requests for proposals for a line of credit for the county should it have to step in to meet the hospital's financial obligations.

"We're hoping and praying that we don't, but we want to be prepared just in case there was a need to dip into this line of credit," said Chairman Chad Henderson.

"This is just authorizing us to proceed and send out the request for proposals," said Roger Murray, bond attorney for the county. "We'll get the proposals back, then I'll come before the board again. You'll have an opportunity to authorize the final firm and the final transaction."

"We are not voting to borrow money right now," Henderson stressed.

Murray gave some history of the county's obligation to back the hospital.

"Back in 1978, the county entered into an intergovernmental contract with the [hospital] authority, and that contract has been continued all the way up until 2007," Murray said. "Under the terms of that contract, the county agreed to provide to support the operations of the debt service of the hospital authority."

"The county's in the position right now where it has to provide money to the hospital authority, but the exact number is unknown," Murray said, noting when it's going to be due also is unknown.

Murray proposed that he and County Manager Phil Sutton solicit proposals for a line of credit.

"If the money is needed to pay hospital operations or debt service, you can draw down on the line of credit and repay that over an extended period of time as opposed to having a shock to your budget or your cash flow," Murray said.

Following the meeting, Henderson commented further on the issue.

"In anticipation of there being some shortfall due to a letter that we were sent by the hospital authority and by the finance director of the hospital back several weeks ago, I went to [County Manager Phil Sutton] and asked him to come up with contingency plans just in case we weren't to actually meet the financial obligations of the hospital," Henderson said.

"We got with our bond attorney, Roger Murray, and asked Roger for several different options to be able to take a look at what we might need to do to shore up that institution," Henderson said. "We were looking at several different scenarios, one being on a short timetable, one being on a little longer timetable. What we've come up with would be to look at and RFQ for a line of credit that would allow us to finance what we would need to in the short term. When I say the short term, it would be for up to a five-year period, and that basically is buying us time."

"We will continue to work with the hospital authority and hope that this isn't actually needed, however I just felt as though it was something we needed to make sure we put in place in case we do run into a situation where the county does not have other money to meet those obligations," Henderson said.

In response to a question from Commissioner Sonny James, Henderson said the line of credit would be used only if required and would not cost anything unless utilized.
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