Southern Regional Medical Center officials are asking Clayton County leaders to issue bonds to help the hospital cover its operating expenses. (Staff Photo: Curt Yeomans)
JONESBORO — Raymond Johnson and Timothy Vondell Jefferson sat across an aisle from each other Tuesday night and debated the merits of paying for a civic arena with Special Purpose Local Option Sales Tax funds.
The arena is one of the projects that has been proposed for inclusion on a 2015 SPLOST project list that will go before voters later this year. Although there are hundreds of millions of dollars in proposed projects, the 6,000-8,000-seat arena has risen to be one of the most debated proposals.
“I would like to see a civic center built,” said Jefferson.
“Why? What would you do with it?” Ware asked.
“The civic center is a revenue generator,” Jefferson said.
What Ware and Jefferson likely didn’t know — because it hasn’t been discussed much in public yet — was that a new issue was looming that will change the SPLOST conversation completely.
The county may put $75 million in debt payments — for a debt it has not yet incurred — on the SPLOST list to pay off new 40-year general option bonds Southern Regional Medical Center officials have asked commissioners to issue to help keep the hospital afloat.
The hospital says it needs government support, as well as making its own budget cuts to cover funding shortfalls.
“[Twelve million dollars] per year in additional cash flow along with an additional $12 million in financial improvements, which Southern Regional will achieve through a combination of reducing overhead, programs and services will be required to sustain Southern Regional,” hospital CEO Jim Crissey wrote in a Jan. 15 letter to commission Chairman Jeff Turner.
The county’s options for paying off the loans, if they are taken out, would be to repay the debt with the SPLOST funds, raise the property tax rate by two mills or a combination of sales and property tax funds.
“Southern Regional is a vital institution in our community and we value the fact that we have a hospital here,” said Turner. “That’s the first thing we’ve looked at. We’re also looking at how the hospital got into this situation and what can they do to keep this from happening again if we are to give them funding. The fact is they need some help.”
If the bonds are issued, it would be the second time in five years that such a step has been taken by the county to help Southern Regional out financially. In 2009, $40 million in hospital bonds were refinanced using the county’s bond rating to keep the medical center open.
Compliance with federal law creates financial burden
Free patient care provided to patients who came to Southern Regional without an ability to pay cost the hospital $82.2 million and $85.1 million in 2012 and 2013 respectively, according to its 2013 community report.
Although the hospital was able to offset most of those expenses with revenues, the report shows it still ran net losses of $13.3 million in 2012 and $17.1 million in 2013.
In an interview Thursday, Crissey said the solution to the issue is not as simple as deciding not to doll out the free care. Under the federal Emergency Medical Treatment and Active Labor Act, the hospital is forbidden from turning away someone who comes into their emergency room for medical care.
“We’re invested in our community, but quite frankly over the years the escalating cost of providing free care to the community without any funding to offset these costs has placed Southern Regional in an untenable position of having to struggle to meet its financial obligations,” said Crissey.
Southern Regional provided “charity care” to 3,941 patients in 2013, and 79.9 percent of them were from Clayton County, according to the hospital’s community report.
Of the remaining patients, 7.8 percent came from Fulton County, 7.3 percent were Henry County residents, 1 percent were from DeKalb, 0.9 percent were from Fayette and the remaining 3.1 percent fell into a category labeled as “other counties.”
Crissey said local government support of hospitals is not uncommon and pointed to financial support Fulton and DeKalb counties give to Grady Memorial Hospital as one example.
“Not being unlike any other hospital, we are requesting the county commissioners give serious consideration to providing Southern Regional with additional long-term funding from the tax base to offset these costs,” said Crissey.
SPLOST funding means less money for community projects
When commissioners received their first formal presentation on the hospital’s situation during a retreat Saturday, they immediately began leaning towards the option of paying off the debt with the 2015 SPLOST.
But paying off that debt with SPLOST dollars means the county, and possibly its cities, will have less money than previously thought. Turner said the county is in discussions with the county’s seven mayors about adding the debt payment as a Level 1 or Level 2 project that means the county and the cities would have less money for community projects.
“That would be the best way,” said Turner. “Nobody wants to raise property taxes, but we have to consider all of the options.”
The mayors had previously expressed opposition to including Level 1 or 2 projects to the SPLOST list, but that was before they were made aware of the hospital’s situation. Turner said the municipal leaders are expected to meet within the next week to discuss the matter.
“The hospital serves all citizens of Clayton County, both those in the cities as well as unincorporated parts of the county and we as a county have to address this issue,” said Turner.
If the SPLOST route is taken, it means some proposed projects which had been on the bubble, such as the civic arena, may no longer have a chance.
Commissioners got their first formal presentation on the issue at their retreat and were asked to come up with a list of SPLOST projects they felt could be cut or reduced in scope to pay the hospital bonds. The civic arena was the first project several commissioners suggested be cut.
But Turner said all options, including paying of the debt with higher property taxes, are still on the table at this point.
“Basically, this all boils down to whether we want a hospital in our community or not,” said Turner.
County wants ‘assurances’ from the hospital
If the county issues the bonds, the assistance likely won’t come without at least one string attached. That string will likely be a requirement that the county has at least one seat on the hospital’s board of directors.
When the board agreed to refinance the bonds in 2009, it gained two seats on the board of directors. One seat was held by the county’s finance director and the other was held by a member of the commission. However, county staff told commissioners that the hospital board did not extend that presence once those terms expired.
Commissioners said they would want that changed, with several of them saying the county needed to have a seat on that board on a permanent basis.
“We need some assurances,” said Hambrick.
Turner said the county will at the very least expect to see Southern Regional officials produce a cost-cutting plan that puts the hospital on solid long-term financial footing.
“A lot of this is on the back of the hospital,” said Turner. “They will have to be able to come up with a plan to adequately address their issues.”