Haverhill, Mass., is trying to unburden itself of the last municipally owned hospital in the commonwealth, possibly with the aid of $30 million in state-authorized bonds.
Haverhill's relationship with Hale Hospital has caused the city's credit rating to seesaw with the health of the hospital's finances. So, in an attempt to get well, the city is seeking a buyer for the establishment.
If a buyer isn't found, the General Court has authorized a bill allowing for up to $30 million in bonds issued by the city to deal with the "sale, transfer, or closure" of the hospital. The governor has until Monday to sign the bill, which also contains a provision allowing the hospital to issue refunding bonds in addition to the new money bonds, related to the closure.
Because Hale Hospital is municipally owned, the city can issue debt for it and must also make up any losses incurred, such as the $7.8 million loss in fiscal 2000. So far in fiscal 2001, the hospital has lost about $1 million a month, according to William Klueber, Haverhill's finance director. The city is now looking at an accumulated deficit of $19 million for the hospital.
The city is responsible for an additional $20 million in outstanding debt resulting from a 1982 general obligation bond sale of $31 million to upgrade the hospital after the commonwealth threatened to pull its accreditation. About $8 million more in unfunded pension liability brings the city's total responsibility on behalf of the hospital up to $47 million.
If Gov. A. Paul Cellucci signs the legislation allowing the city to issue $30 million in bonds, that issuance would go toward paying off the city's hospital-related deficits.
The city issued a request for proposals, due back Feb. 20, for someone to buy or affiliate with the hospital. The city did this once before in 1997, but an asking price of about $67 million and an inability to conduct private negotiations under the state's open meetings act stymied the process.
Now the city can negotiate behind closed doors thanks to a statutory exception, but according to James Kirkpatrick, a vice president of finance at the Massachusetts Hospital Association, the unfunded pension might stand in the way of a sale. He believes that the city has a chance to pull off a sale successfully.
"I think there's a lot of value there with a municipal hospital, and it should be a viable entity," Kirkpatrick said. "I think it takes a lot of creativity from the municipality and the managers of the institution to make it work, especially in the current health care environment."
Massachusetts is experiencing the same tumultuous health care environment that is being felt around the country, with the federal Balanced Budget Act reducing federal payments to hospitals and nurses in short supply. Hospitals also complain that the state only pays about 80 cents on the dollar in Medicaid reimbursements, and earlier this year more than 30 hospitals around the state applied for state assistance under a distressed-hospitals program.
"To some extent the position of the city has deteriorated as a result of the hospital's operations," said Jeffrey Kaufmann, an assistant vice president with Moody's Investors Service. "At the end of the day we are waiting to see what the deficit is and how the city will address it."
Moody's gives the city a rating of Baa3, and Standard & Poor's rates the city BBB.
