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Home > ... Federal Financing Updates > 10-5-06 Colorado CAH Financing
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Monitoring markets, switching financial structures saves hospital $16 million
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DENVER (Oct. 5, 2006) – Good things came to those who waited when unforeseen circumstances delayed a replacement hospital’s construction. Heart of the Rockies Regional Medical Center in Salida, Colo., saved $16 million after health care lender Lancaster Pollard advised a change in financing strategy when interest rates shifted during the delay.
The replacement critical access hospital is the culmination of a massive effort to turn around the hospital’s finances and re-establish Heart of the Rockies as a strong economic driver and a modern provider of medical care. The hospital, built in 1897, continues to play a major role in Chaffee County development, but the 100-year-old campus was land-locked.
Lancaster Pollard analyzed several financing options, and the hospital chose to combine a taxable bond issuance with a direct loan under the U.S. Department of Agriculture’s Community Facilities Program. As the financing proceeded, construction was delayed as the U.S. Army Corps of Engineers investigated a possible wetlands issue at the new site. Concurrently, credit spreads continued to narrow and interest rates continued to rise. Lancaster Pollard monitored the markets constantly during the delay. As the wetlands concern was dismissed, Lancaster Pollard recommended HRRMC change its strategy.
On October 5, 2006, the hospital obtained $30.2 million in unrated, tax-exempt bonds that are fixed for 30 years at 5.25 percent. This structure, not usually affordable to smaller hospitals, saves Heart of the Rockies Regional Medical Center $16 million in long-term borrowing costs over previously considered financing structures.
The 25-bed, 86,671-square-foot replacement hospital will be more consistent with today’s outpatient hospital model. It will allow the hospital to explore additional services through technological advancements and partnership opportunities, which in turn should better serve residents and reduce the impetus to seek certain services outside the community.
The new hospital will be financially well positioned because of its leadership’s foresight in overhauling finances, services and patient and staff satisfaction, and because of Lancaster Pollard’s efforts to constantly monitor market fluctuations to be sure the hospital was choosing the best option available, even as those options changed.
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