Wednesday, January 18, 2012

Wishard Hospital's Bonds Downgraded by Rating Agency; Should Taxpayers Get Out Their Wallet?

Big news on the financial front. Fitch Ratings has downgraded the ratings of $218.8 million of tax general obligation bonds and $465 million in lease revenue bonds which were issued by the Indianapolis Local Public Improvement Bond Bank (Health and Hospital Corp. of Marion County).
New Wishard Hospital Groundbreaking

Remember these Wishard bonds were financed out of the income stream of HHC, supposedly without raising taxes.  Now it appears HHC will have to pay higher interest on the money borrowed to finance the facility.  Not to worry though...the referendum that passed in 2009 provided that we taxpayers would be on the hook if the HCC could not pay for the facility out of its cash flow generated from from higher-than-normal Medicaid payments for its extensive nursing home operation.
Here are some tidbits from the report:
HOSPITAL OPERATIONS RISK: The rating downgrades reflects Fitch's increased focus on the financial risk related to the operation of the hospital as outlined in the July 15, 2011 press release 'Fitch Refines Methodology for Rating Tax-Supported Debt of Public Enterprises', which is available at 'www.fitchratings.com'.     
CHALLENGED HOSPITAL FINANCIAL PERFORMANCE: HHC's Wishard Hospital financial operations are weak and vulnerable to changes to state and federal funding given the large number of Medicaid, Medicare and indigent patients. However, qualitative factors are strong, including an experienced management team.
STRONG SECURITY: Debt service on the bonds is secured by an unlimited ad valorem tax pledge of HHC, a component unit of the consolidated city of Indianapolis-Marion County.   (Comment:  we taxpayers are on the hook for the bonds to an unlimited amount.)
...
REPLACEMENT HOSPITAL FACILITY 
...
HHC is legally obligated to fund the annual debt service on the 2010 A and B bonds using a dedicated property tax if other revenues are not sufficient to fully pay the bonds in any given year; however, HHC currently funds 100% of the debt service for these bonds through operating revenues. In addition, HHC will contribute $150 million ($80 million to date) in accumulated reserves to the Wishard replacement project, leaving approximately $150 million in reserves, which Fitch considers an adequate operating cushion.   
To see the rest of the report, click here.

8 comments:

Downtown Indy said...

Oh, but they promised that could NEVER happen!

Jon said...

Typcial Indy snafu, the place isn't built yet and already we're finding out that it's going to cost more than they thought.

Pete Boggs said...

So..., general obligation bonds (GO, secured by property taxes) were available at lower interest than revenue bonds for the Wishard expansion, which proponents claimed would be funded by hospital REVENUES. Reality check: it's the property of citizens that's been used to collateralize the Wishard expansion (property taxes)- not the revenues they projected would float its cost. What kind of pressure would Wishard's floundering place on property tax payers; upward or downward?

patriot paul said...

Much of the Bond Bank uses our property as collateral, but most people are unaware of it.

HOOSIERS FOR FAIR TAX said...

Patriot Paul is right. I remember the day we learned the fact that they use our property as collateral. It was quite the sickening shock.

Paul K. Ogden said...

The day is going to come when the feds review the Medicaid reimbursement system and put an end to HHC's collection of excessive reimbursements by its shell ownership of nursing homes. The Fitch report recognizes this.

Maurice.W said...

I hope that they will stick to what they say, if not I sure the people will get mad.
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andieclark said...

This is the reason we chose to have hospice care for our parents. Base on our experience, we don't really get the worth of our hospital bills.