Financial first aid for a mountain hospital

An unusual financial arrangement has taken Habersham Medical Center in Demorest off the critical list.

In a deal with the local hospital authority, Habersham County has agreed to make monthly bond payments on the northeast Georgia hospital’s $37 million debt, and will eventually take over the assets of the facility.

Habersham Medical Center

Habersham’s financial move “has been already beneficial to the hospital,’’ Demorest Mayor Rick Austin told GHN on Monday. “It immediately puts us back in the black.”

“This hospital is incredibly crucial to our community and our county,’’ Austin said.

Habersham strongly promotes itself to tourists and potential retirees. The availability of good health care is essential to attracting such people.

The agreement comes at what some experts consider the most pressing financial time ever for the state’s hospital industry.

Rural hospitals, such as the Demorest facility, are under heavy fiscal strain. Four hospitals have closed in rural Georgia over the past two years, with others many experiencing cash problems.

As leading employers in rural communities, hospitals have a major impact on county economies.

Chris Kane, an Atlanta-based health care consultant, noted Monday that a hospital and school system provide the foundation for a local community’s economy.

“It is prudent for the county and the hospital authority to work together in backing the bonds of the hospital,’’ Kane said of the Habersham situation.

“The business environment for acute care hospitals is the most challenging in my 30 years in the industry,’’ he added.

Besides changes from the Affordable Care Act, Kane cited factors that include the growth of high-deductible health plans that can increase the bad debt for hospitals; physician shortages, especially in rural areas; and rising pharmaceutical prices.

Habersham Medical Center, a 53-bed nonprofit hospital, underwent a $38.6 million expansion and renovation project several years ago, opening a new emergency department and a 24-bed outpatient surgery center.

But since then, the economy plummeted, and experts say hospitals also saw reduced payments from government insurance programs and private insurers.

David Kerby, chairman of the Hospital Authority of Habersham County, said Monday that while a new management team has helped the facility’s cash flow, “We got to the point where it was difficult making these [debt] payments.’’

“We had just run out of time,’’ Kerby said.

The bonds have been refinanced since the agreement was reached, he said.

About half of the state’s rural hospitals are being helped with county funding, said Jimmy Lewis, CEO of HomeTown Health, an association of rural hospitals in the state.

“It’s absolutely necessary for rural hospitals to be supported by their counties,’’ Lewis said.

The Habersham Medical Center deal “is unusual because of the magnitude of the hospital’s debt and its apparent direct impact on the financial viability of the county,’’ he added.

“I don’t know of any other deal like this,’’ Lewis said. “This is uncharted water.”

Chad Henderson, the Habersham County Commission chairman, told DebtWire Municipals that the bonds will be paid with an indigent care property tax, which is currently used to cover the bonds.

But that tax covers only about a quarter of the bond payments. DebtWire reported that Habersham County has a referendum on a SPLOST in November, which could cover the rest of the money owed.