Hospital in Rhode Island Goes From Building Boom to Big Debts to Slow Recovery
A new report from the Rhode Island Department of Health details how 100-bed South County Hospital in Wakefield, R.I., went from aggressive construction in 2007 to big debts in 2008 to slow financial recovery starting in 2009, according to a report by the South County Independent.
The hospital opened a new orthopedics center and bed tower in 2007, a cardiac catheterization laboratory in 2008 and an off-site medical center in 2008.
This required aggressive debt financing that created a debt-to-asset ratio of 110 percent, the second highest in the state. South County had $52 million in the auction rate securities market in 2008 and was forced to pay a 49 percent increase in interest that fiscal year.
In 2009, the hospital reduced interest expenses by $4.5 million from the previous fiscal year through lay-offs and improving medical coding and documentation.
It then re-marketed its Series A bonds from auction rate to term rate, with a 2 percent interest rate in the first year. The change in rate terms reduced Series A debt from $52 million to $42 million.
"We are heavily leveraged, but we are at the end of building, and have no need to [seek] major financing in the near future," said Thomas Breen, CFO for the hospital.
Read the South County Independent's report on South County Hospital.
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