Middle Park Medical feels financial pains
January 7, 2014
GRANBY/KREMMLING — Health insurance woes have trickled up to hospitals, and Middle Park Medical is feeling the pangs of economic strain.
Construction of the Granby medical facility, which opened for business on Jan. 1, 2012, was financed by a hospital revenue bond. The bonds are tax-free municipal debt and usually backed only by the revenue the hospital is able to generate. Middle Park Medical makes payments on the interest and principal of the debt twice a year, with total payments running about $1.7 million annually. After a payment came due in the amount of about $940,000 this winter, the Granby facility was forced to dip into its $1.7 million reserve fund, drawing the almost $1 million needed.
Middle Park Medical public relations and marketing director Michelle Balleck reported the payment was made on time. But a Dec. 19 letter issued by UMB Bank, a trustee for the hospital bond, stated the hospital had failed to make its base rental payment on Nov. 15, creating an "event of default." As a result, the bank drew out of the reserve fund to make the payment. Bond covenants require Middle Park Medical to replace reserve funds within six months.
According to information provided by hospital representatives, the financial troubles are caused largely by unpaid bills. The hospital has more than $8 million in accounts receivable, with about 50 percent of it owed directly by patients.
“The impact remains to be seen because we don’t even know the full ramifications of what the Affordable Care Act will mean.”
Middle Park Medical Center CEO
"The biggest challenges have been around the revenue cycle," said hospital chief financial officer Brendan Gale in a statement. "We're seeing more and more patients with very high deductibles, co-pays and co-insurance obligations."
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As patients shift away from traditional employer-sponsored health insurance coverage, instead opting for plans with lower monthly premiums but higher deductibles, they're finding themselves strapped after medical procedures. Gale said that while Middle Park Medical Center has tried to keep rates low, the uninsured and under-insured are having a hard time paying up. The hospital had to write off over $2 million as uncollectable over last year.
"As a special district hospital, we have always worked to provide as many services as possible with the funds we have," hospital CEO Cole White said in a statement. "That means our cash reserves have always been pretty lean."
The hospital receives about $1.1 million in tax revenue, which amounts to about 5 percent of its operating budget. But according to officials, Middle Park Medical provides around three-times that amount in uncompensated care. With a tight operating budget, the growing patient deductibles, care for the uninsured and slashes to Medicare from the sequester, the hospital district is exploring options with its bondholders and partners to improve cash flows. Even as the number of uninsured and under-insured drops as mandates under the Affordable Care Act ("ObamaCare") go into effect, hospital officials aren't convinced it's the financial cure.
"The impact remains to be seen because we don't even know the full ramifications of what the Affordable Care Act will mean," White said. "Until the full impact of Obamacare flushes out, we don't know what all of the effects will be to MPMC and rural health care."
Leia Larsen can be reached at 970-887-3334 ext. 19603.