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Hospital misses deadline for audit

Eben Harrell

Aspen Valley Hospital violated its legal obligation to disclose its certified audit for the 2003 fiscal year by June 1, according to a New York-based bond rating company.A representative from Fitch Ratings said Wednesday the firm was “very concerned” that AVH missed its deadline to make its books public. The company sent out a nationwide press release announcing the violation as a possible indication of “poor management practices.” AVH officials defended the delay, saying the hospital missed the deadline because its financial sector is being overhauled.A bond rating is one of the factors that impacts the interest rate the hospital must pay on its bonds. It is also an indication to investors of an institution’s financial stability.”Aspen Valley Hospital has certain obligations and requirements for their bonds, one of which is to provide certified audits by a certain time.” Fitch Ratings spokesman Fred Martucci said. “It’s like a tenant that says the ‘rent check is in the mail.’ There might be a logical explanation for the delay, but as of today, investors can’t get any information on the hospital’s bonds, and I think that stinks.”Aspen Valley Hospital treasurer and board member John Jellinek said the hospital missed the deadline because it recently changed auditors in an attempt to right its financial situation. In April, AVH fired its auditing company after it failed to alert the hospital of nearly $12 million in uncollected bills. The new auditing company, Grant Thornton, simply did not have time to perform the audit by June 1, according to Jellinek.”You can’t send out financial statements that aren’t correct,” he said. “We informed Fitch Ratings that our statements would be late. It’s not a bad thing. It’s the reality of where we are right now as we’ve been working to get a hold of our financial situation.”The violation of the bond agreement comes at a time when the hospital’s bond rating is already on the verge of dropping. In April, Fitch Ratings responded to the hospital’s announcement of millions of dollars of uncollected hospital bills by putting AVH on a negative rating watch, an indication that its bond rating of BBB was likely to drop to BBB- in the coming months.If a bond rating drops below BBB-, it is considered “non-investment grade,” or “junk.”The rating refers to two bonds issued in 2000 and 2001 totaling roughly $14 million.Fitch’s announcement of the missed deadline is a possible setback to a hospital scrambling to regain the trust of the public and its investors. A press release from Fitch was sent to news stations across America naming AVH as one of seven health-care institutions that failed to meet its audit deadline.”Untimely delivery of financial information is not only a violation of the credit’s obligation to provide bondholders with continuing disclosure but also may indicate financial distress and/or poor management practices.”Jim Carris, the hospital chief operations officer, noted that the hospital makes weekly contact with its primary investors and Fitch Ratings. He also said the hospital has worked to keep the public informed of its financial situation.”Anyone who has been to the last board meetings knows we’ve been open about what’s going on,” Carris said. “In regard to our bond rating, we’ve stabilized and we’re trying to move forward and I think people will acknowledge that.”The certified audit for 2003 should be released in the next month, Jellinek said.Eben Harrell’s e-mail address is eharrell@aspentimes.com


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