Buoyed by a state-mandated governance overhaul, Slidell (La.) Memorial Hospital won voter approval this month of a new tax to pay off its long-term debt.
Two previous capital proposals, including a larger property tax floated in July 2002 and a sale to Tenet Healthcare Corp. put forth in April, failed to pass muster with the electorate.
Proceeds of a new 20-year tax on properties in eastern St. Tammany Parish, La., will erase $22.5 million in bond debt, freeing up cash that the public hospital plans to use to make capital improvements and improve its borrowing ability, hospital officials said.
The hospital reported operating revenue of $51 million for the first six months of 2003, up 5.1% from $48.5 million in the first half of 2002. Meanwhile, earnings on operations increased 12.5% to $5.5 million, from $4.9 million the previous year.
But liquidity measures-39.4 days cash on hand and a debt-service coverage ratio of 1.6-remain below industry benchmarks. The hospital pays about $6.5 million annually to service its bond debt, which will be eliminated with the new tax.
Hospital officials said a state law passed in June that mandates a public process for board appointments and encourages professional qualifications helped instill public confidence in the hospital's future (April 21, p. 18). Fifty people applied to serve in seven nonphysician seats on the new nine-member board, which is expected to be appointed this month.
The hospital also ran a low-key campaign that included employee- and physician-sponsored newspaper ads and public forums rather than big-budget advertising and "scare tactics" that characterized previous campaigns, said Sam Caruso Jr., the hospital's director of physician relations and recruitment.
Caruso, who managed the most recent campaign, said the hospital spent $80,000 to $100,000 vs. $400,000 spent on last year's failed measure and $1.5 million spent by Tenet in its unsuccessful bid to win voter approval of a sale. "Certainly, we learned an awful lot about what people do and don't want to see and hear," Caruso said.
The measure passed 16,446 to 10,453, or 61.1% in favor, according to unofficial results.
In their pleas for capital, hospital officials have cited competition from physician-owned specialty hospitals. Chief Executive Officer Bob Hawley called passage of the tax "a strong message for full-service acute-care hospitals."
But in its most recent financial report, the hospital reported stable or increasing volumes in the second quarter despite the openings of two competing physician-owned specialty hospitals. Management said high utilization could be the result of "renewed loyalty" to the hospital.