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New hospital could be 14 months away

$1.5 million bond issue draws some criticism

News editor

The dream of a new Hillsboro Community Hospital facility has been a fitful one in recent years, but it could become reality by September 2016.

Hillsboro City Council members, acting Tuesday in their dual role of public building commission, set in motion a plan to issue about $1.5 million of revenue bonds for infrastructure and site development for the facility, to be built at US-56 and Industrial Rd.

Hillsboro Community Hospital has a USDA-secured $9.7 million loan lined up through the Bank of Hays, but the deal was contingent on the city coming through with the additional development funds.

“We wanted to make sure the hospital funding was going to be funded before we actually did any action,” city administrator Larry Paine said. “We’ve had this concern about, ‘Well, is it ever going to get built?’ We’ve been fairly positive about it all the time, but it was still a question.”

Michael Reeh objected to the plan, citing concerns about the 2011 Chapter 11 bankruptcy of HMC/CAH Consolidated, the hospital’s owner. The company successfully emerged from bankruptcy in January 2013.

Reeh also brought up Yadkin Valley Community Hospital in North Carolina, an HMC/CAH facility that closed in June.

“What you’re doing is setting up a monopoly that allows them to continue to want money to keep the operation going, or they’re going to shut the hospital down like they did in Yadkins,” Reeh said. “They shut the hospital down because the county refused to continue funding them.”

Paine countered that Yadkin County was moving away from the contract, and that they refused to work with HMC/CAH to retain the hospital’s critical access designation.

Reeh made several additional unsupported allegations about the company, but was far outweighed by hospital supporters.

“I see this as Hillsboro’s only chance to have a new hospital, and if we don’t get a new hospital, we will not have any hospital at some point,” building commission chairman Bob Watson said.

The commission voted unanimously to proceed with the bond issue.

The bond issue will be, in essence, a loan from the city, as the agreement requires CAH to repay all principal, interest, and costs over a period not to exceed 25 years.

“This is the only thing we’re doing for this project,” Paine said. “There are no property tax abatements, no other incentives going on. For all intents and purposes, they’ll be pulling their full weight.”

The city has a safeguard if the hospital isn’t able to make its payments.

“We’re going out on a limb with a million and a half dollars worth of debt,” Paine said. “We can’t guarantee over the life of the agreement and bond that the hospital will be financially solvent the whole time. To offset that, we’ve accrued nearly a half million in a PBC fund that we started years ago.”

That fund has been built through rent payments from the hospital and Salem Home, as well as periodic city contributions. These practices will continue, Paine said, and the fund could build to the point that the city pays off the bonds early.

“We could pay off that bond and have the debt go away while still getting reimbursement from the hospital,” he said. “They’re still going to pay $1.5 million even if we pay off the bond. I can use it for other capital improvement projects, like to rebuild a street.”

The bonds won’t be issued immediately, because an ordinance change is necessary for the building commission to work in concert with a for-profit company. The process will take a little over two months, Paine said.

Hospital CEO Marion Regier said once the bonds are sold, construction can begin.

“With this investment that we are making in the community I think this ensures a bright future for health care in Hillsboro,” she said.

The design of the hospital has changed slightly since original plans were made, Regier said.

“This hospital is designed to have eight inpatient beds, with the rest of the hospital being utilized for outpatient services,” she said. “That’s the trend, and insurance companies are pushing for that.”

A medical office building that would have been privately owned will now be part of the hospital.

“We now have our own clinical staff and providers, so we will have our own office building attached to the hospital and we’ll be all one entity,” Regier said.

Last modified Aug. 5, 2015

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