Bond rating a positive sign for Aspen Valley Hospital
The Aspen Times
Aspen, CO, Colorado
ASPEN – Aspen Valley Hospital’s bond rating was recently upgraded by Moody’s Investors Service, a credit-rating agency headquartered in New York. The move means the hospital can attain a lower interest rate on certain debt, but its true significance might lie in what it says about the hospital’s financial health.
Roughly a decade ago, the hospital was millions of dollars in debt, largely a result of billing mismanagement.
“There was truly a time there when our hospital may or may not have survived,” said John Sarpa, first elected to the hospital’s board of directors in 2002 and immediately thrust into the role of chairman. Now in the midst of his third term, he remains at the board’s helm.
Ask Sarpa if he could have foreseen a hospital in healthy enough shape to earn a better bond rating or embark on a $76.4 million expansion project, which is now under way with a significant contribution of the hospital’s cash reserves, and he answers: “No way.”
The hospital has the highest Moody’s rating among the critical-access hospitals (25 beds or less) the service has rated, according to hospital CEO David Ressler. He credits the hospital’s board of directors for taking control of the situation and putting the hospital back on track.
Sarpa gives the credit to Ressler and Terry Collins, chief financial officer.
“Much if not most of the credit goes to them, for sure,” he said.
Both men were hired in 2004 after the hospital parted ways with the individuals who previously held both posts and hired an interim CEO and CFO to begin the process of overhauling the hospital’s finances.
Some of the problems took years to rectify, Sarpa said, lauding both the community for continuing to support a property tax that supports AVH and patients who paid debts that should have been collected years earlier.
“A lot of people got some really, really old invoices, and they helped us by paying,” he said.
Today, the hospital tries to carefully anticipate the demand for its services and the resulting revenues, according to Ressler. While emergency room revenues took a recessionary dive – fewer visitors to Aspen means less demand for services – the care it provides to the community remained steady, he said.
And, for the first time since the recession began, 2011 numbers reflected the hint of a turn-around, according to Collins. Various AVH services were either up slightly or flat last year, compared to 2010.
Last year’s operating revenues at the hospital totaled $59.7 million, up 1.42 percent above what was budgeted for 2011. Operating expenses totaled $57 million, about 2.5 percent less than what was budgeted, and AVH finished the year $2.6 million in the black for its operations, according to its year-end profit-and-loss statement.
Because the hospital is a local nonprofit, none of the revenues are funneled to owners elsewhere, Ressler said. They’re plugged back into the hospital.
Hospital employees received an average wage hike of 2.4 percent last year and a raise is budgeted for this year, as well. The hospital also enacted a 5 percent rate hike in 2011 and has budgeted a 5 percent hike in 2012, though its rates remain competitive – in some cases noticeably – compared to other facilities in the greater area, according to Ressler.
The hospital avoided recessionary layoffs, but has trimmed its seasonal staff and trained employees to help fill in at jobs outside their primary area of expertise.
The ongoing expansion project, supported by a $50 million bond issue approved by voters, is also financed by $26 million that includes philanthropic contributions and the hospital’s own cash reserves. Building up cash to put into the project, and maintaining the hospital’s fiscal health through the recession led to the bond-rating upgrade, according to Collins.
“We were sort of thinking if they held our rating level, we’d be pretty happy with that,” he said.
The expansion is phase 2 of a four-phase project that is intended to upgrade AVH into a facility that will meet the community’s needs for the next 20 to 30 years, Sarpa noted. Dividing the project up into four parts was financially prudent, he said. Phase 2 is by far the biggest piece.
“We didn’t want to plan for something that we might not be able to pay for,” Sarpa said.
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