Local hospital boards OK bond issue

ALBANY -- The Albany-Dougherty County Hospital Authority and the Phoebe Putney Memorial Hospital board authorized a series of transactions Thursday to issue about $99 million in tax-exempt bonds through JP Morgan Chase for reimbursement of capital projects developed during the last few years.

The bond issue was also approved by Phoebe's finance committee. The resolution calls for the authority to issue the bonds and the hospital to assume responsibility for repaying the bonds over a 30-year period. The interest rate on the loan will be less than 1 percent.

The bond's term is set to be renewed in seven years. About $100,000 must be paid up front. Under the terms of the resolution, Phoebe is expected to have greater than 75 days of cash on hand and a debt service coverage ratio greater than 1.10.

"Our historical (debt service coverage) ratio is around five, so this is relatively low," explained Kerry Loudermilk, chief financial officer for the hospital.

Authorization for the transaction comes at a time when officials say the credit market is more favorable that it has been in recent months.

"Credit markets seem to have softened up a bit, so we can access the credit market," Loudermilk said. "(The bond issuance) is a furtherance to bring the health system to the highest standard that we can."

The funds will be used to reimburse costs from building Medical Tower II, which opened last year. The money will also cover the development costs for Willson Hospice House not previously covered by contributions from donors. Costs for the medical tower were $46.1 million, while the hospice facility was $14 million.

Other projects include floor renovations, laboratory expansions, a renal dialysis center, the daVinci Robotics Surgery system, inpatient rehabilitation and smart IV pumps.

Phoebe has a AA-bond rating with national credit rating agencies, the highest available to health care organizations.

"We have as high of a credit rating as you can get," said Phoebe Putney Health System CEO Joel Wernick. "We find ourselves in the top 5 percent of (hospitals) our size.

"Our goal is to sustain the financial stability of this institution."

Roughly $10 million of the bond will be set aside for future capital expenditures. The transaction is expected to take place next month.

"Over the next three to four weeks, we will finish all the paperwork and by the end of July, will hopefully finish the transaction," Loudermilk said.

The hospital's finance committee also approved its IRS Tax Form 990, which is expected to be posted on Phoebe's website by the week's end, along with the hospital's previous 990s and audits.

The committee also reviewed Phoebe's financial holdings for the year to date. The presentation given by Loudermilk reflected that the hospital is so far $20 million underbudget.

"This is complimentary to (Phoebe's) team for their ability to do that," the chief financial officer said. "We are having a good year; things are going well.

"While we still have a lot of economic problems, we are more stable financially than we were 10-12 months ago."

The authority also recently approved a land purchase from the city of Albany at 421 Society Ave. for $28,000. What the future holds for that piece of land is unknown at this point, but there are prospects for it.

"It sits adjacent to the Crimmins House, which is used for housing medical students," Wernick said. "This gives us added flexibility."

At the hospital board meeting, a $260,882 perinatal grant was approved to provide care to high-risk mothers and infants -- something that is typically done on an annual basis. Close to $75,000 is set to be used for neonatal administration, while the remainder will be used for maternal administration.