Letter to the Editor: Mahaska Health Partnership Board of Trustees wishes to clarify

Mahaska Health Partnership (photo by D.Hubbard)

Editors Note: The views and opinions expressed in this editorial are not necessarily the views or opinions of Osky News

As members of the Mahaska Health Partnership Board of Trustees, we want to take this opportunity to clarify some information regarding MHP’s current expansion project.
The key issues facing healthcare in this community in the coming years are personnel and facilities.  The MHP Board has made these two items a priority.  With regard to the hospital itself, the hard reality is that it is not equipped to meet the growing needs of healthcare in the 21st century. For instance, new surgical technology is available that we cannot accommodate due to ceiling height limitations. For Inpatient Services, the market trend has already heavily shifted towards private rooms which provide a healing environment, allow for patient care amenities and promote patient safety. We are facing increasing patient demand for services that we cannot fulfill with our current facility.
In order to assess how to best handle this need, we commissioned an in depth study, including a five-year financial projection certified by a CPA firm. This study confirms MHP’s ability to pay for this project from revenues. As a very conservative organization, we did not make the decision to move forward with this project lightly.  We reviewed options and different designs for nearly two years before determining the most effective proposal over the long run for MHP and the residents of Mahaska County is to add a new wing to the hospital.
Likewise, the MHP Board has considered several options for financing this project.  We began with an application to the USDA.  There was money available in two different American Recovery and Reinvestment Act programs, and we applied for both.  The programs would have given us the lowest cost financing and the most flexibility.
In the meantime, we decided to move forward with Phase I of the building project, which included the site work and relocation of the helipad and oxygen tanks. This was in anticipation of construction progress during the winter months. Phase I cost approximately $1 million, and was paid for out of MHP’s general fund.
At the end of August, we were surprised to learn that the first USDA program was closed and the funds were used for rural broadband expansion and to shore up teacher salaries.  We were then notified in September that many of the funds from the second program were not available either.  In fact, five Iowa hospitals, including MHP, went unfunded.
Revenue Bonds or General Obligation Bonds remain as two options for funding the project.  Revenue bonds could be issued by the hospital Board itself and are guaranteed by the revenues of the hospital. However, in the current market, Revenue Bonds do not represent the best value because the interest rates are almost 2% higher than General Obligation Bond rates. General obligation bonds may be issued by the County Board of Supervisors.
A concern has been raised that the issuance of either Revenue Bonds or GO Bonds would increase taxes.  We do not anticipate any need for any increase in taxes.  First, we have maintained our tax asking in dollars at the same level for four years, which means the actual levy rate, has decreased in each of those four years.  Tax levy funds are used by MHP to offset the cost of providing services such as public health, mental health, ambulance services and providing care to low income populations. These tax levy funds represent less than 4% of our operating revenues, and our commitment is to continue to reduce that emphasis over the next five years.
The issuance of General Obligation Bonds by the Board of Supervisors rather than Revenue Bonds issued by our Board would result in significant savings over the life of the bonds due to the reduced interest rate.  We estimate the savings to be approximately $12 million.
With General Obligation Bonds, the county would issue the debt, but the hospital would set aside funds and make the required payments.  Those funds would come from our operations.  The only commitment from the county is to issue the debt on MHP’s behalf.  Once the bonds are issued, the hospital would be required to maintain certain operating margins and provide reports to the county.  We have proposed that a formal agreement be put in place to meet these requirements.  Any shortcoming would require action by the MHP Board of Trustees to make operational changes to meet those requirements.  The debt and related interest costs are ultimately the responsibility of the hospital.
A public hearing is scheduled for December 6th at 6:30 pm at the Courthouse to identify the hospital as an Urban Renewal Area. This designation is a necessary step for the Board of Supervisors to issue General Obligation Bonds.  The City Council would also have to approve that designation, since the property is located entirely within the city limits of Oskaloosa.  The Council has already prepared a letter of support and would anticipate approving the designation after approval by the Board of Supervisors.  The Board’s approval is required prior to the City approval.
This is a project that upgrades our facilities to be competitive in the market, and more importantly, provide enhanced patient care.  It also makes MHP more competitive in physician recruitment.   We intend to meet the debt service requirements with our existing and anticipated margins, with no additional tax support.  Our request is for the General Obligation Bonds to be issued, saving future health care patients in Mahaska County more than $12 million in interest costs over the life of the project.
Sincerely,
Michael Grim, Chairman
Becky Siefering, Past Chair
Jon Sullivan, Vice President
Paul Swenson, Secretary
Jim Hansen, Treasurer
Amy McGriff
Mary Sexton