A $20 million grant from New York State is expected to repay $15.4 million of outstanding bonds issued for St. Joseph’s Hospital in Elmira to help finance a yet-to-be-completed merger with another hospital.
St. Joseph’s defaulted on a $2.5 million principal payment due Jan. 1 but quickly received an extension of an existing forbearance agreement, according to disclosure documents.
The due date fell on a Saturday and the forbearance’s continuation, which eliminated the default, was in place the following Monday, according to St. Joseph’s spokesman Denis Sweeney.
“We’re not in default and we’re not obligated to make payments during that forbearance agreement,” Sweeney said. “Our debt will be gone when we merge.”
The forbearance agreement now extends to Aug. 1, 2011. The nonprofit hospital received a forbearance in 2009 when it drew on debt-service reserves and then again in 2010 after it defaulted on its Jan. 1 principal payment, according to disclosure documents.
The hospital has $15.4 million of bonds outstanding from a 1999 issuance that amounted to $32.3 million. The bonds were issued by the Chemung County Industrial Development Agency. IDA officials declined to comment.
In October, the state Department of Health approved the $20 million grant under the Healthcare Efficiency and Affordability Law for New Yorkers program to help St. Joseph’s form a partnership with the Arnot Ogden Medical Center. The grant will pay off the debt and pay for integration costs. The Health Department still has to approve the merger and issue a certificate of need. That approval is expected in late spring or early summer, Sweeney said.
The merged entity will retain both facilities Sweeney said. Another hospital, the Ira Davenport Memorial Hospital joined Arnot Ogden Medical Center last year. The three hospitals will jointly serve six counties with 809 beds in the Twin Tiers region in Central New York and Northern Pennsylvania.
St. Joseph’s, which was founded in 1908, has had financial troubles for some time. In 2006, the state Commission on Health Care Facilities in the 21st Century, known as the Berger Commission after its chairman, Stephen Berger, recommended that it join in regional planning with another hospital to reduce duplication of services. According to the commission’s report, St. Joseph’s was barely breaking even at the time and its bad debt was increasing.
As the economy sank in 2008, the hospital ran an $8.2 million operating deficit compared to a $131,561 one the previous year, according to the most recent audited financial statements available on the Municipal Securities Rulemaking Board’s EMMA website.
