With the publicly owned St. Charles Parish Hospital already facing nearly $50 million in debt, Parish Council members spent hours grilling the hospital’s chief executive last week before finally approving his request to issue up to $10 million in bonds to be paid back from a property tax millage that voters overwhelmingly renewed last month.
Even though voters approved the annual $2.9 million property tax millage for another decade, starting in 2016, council members questioned the hospital’s CEO, Federico Martinez Jr., about the facility’s growing debt, which has increased as the hospital has expanded in recent years.
Martinez was asked about ongoing negotiations for Ochsner Health System to begin providing management services for the hospital under a deal both sides say will expand services and reduce costs for patients.
Martinez defended the decision to partner with a larger health system, saying that doing so is part of an industry trend.
“Look across the country and see what’s happening in health care,” he said. “If you don’t believe today is the right day to enter into a partnership with the larger system to help this hospital address the future, then you really haven’t kept up with health care.”
Pete November, Ochsner’s general counsel and senior vice president of corporate compliance, said he did not anticipate the partnership would lead to layoffs.
“We go in and look at every procedure that we do in the hospital and find ways to cut out unnecessary costs and to improve the quality,” he said. “That’s had a huge impact on our financial results, and I think you would see the same effort brought in here again, to improve quality but also to lower the cost of the procedures and to manage care more efficiently, so there are no unnecessary services being provided.”
Details of the deal are still being negotiated, he said.
Martinez blamed the hospital’s mounting debt on its quick growth. Its revenues have grown but have not kept pace with its expansion, he said, and the hospital’s recent history of borrowing money isn’t likely to change anytime soon.
Martinez, who has worked at the hospital since 1986, said it has grown in its more than half-century from 15,000 square feet to more than 260,000 square feet.
“The hospital is an ongoing concern,” he said. “I was asked one time, ‘When are we going to stop borrowing money?’ and the answer is never. We will never stop borrowing money if we’re an ongoing business. There will always be a need.”
Several council members, though, including Paul Hogan, questioned the hospital’s growing indebtedness.
“Will the debt ever be paid off, or will the debt ever even be reduced?” Hogan asked Martinez.
Martinez replied, “We’ve been very aggressive in growing the hospital. It will not always look like this. We’ve paid down a lot of debt through the years, but we’ve taken on new debt.”
Parish President V.J. St. Pierre said council members were faced with a “hard decision.”
“I don’t get to vote on this deal, and I’m glad I don’t vote on it, but I don’t think you want to be known as the councilman who shut the hospital down,” he said. “If there’s an issue with the board, I think we need to replace the board. If there’s an issue with Fred, we need to replace Fred.”
Martinez warned the council that, without money from the bonds, work would have to halt on the hospital’s new $15.5 million building in Destrehan. Slated to be completed by May 2015, the facility is to house specialty physicians and urgent care facilities, as well as offices, an optometry center and a pharmacy.
Councilwoman Carolyn Schexnaydre said Martinez was putting the council in a corner. “I am insulted that you got up here in front of us and held a gun to our head and said if we don’t pass it, you’re going to shut everything down,” she said.
The resolution allowing the hospital to issue the bonds passed 7-2, with Schexnaydre and council member Billy Woodruff voting against it.
The 2.48-mill tax represents about 7 percent of the hospital’s expenditures. The money is slated to be used, in part, to add a third ambulance during peak hours, to expand the 59-bed hospital’s emergency room, to staff a new cardiology unit and to pay for advanced cardiac life-support training for the medical staff.
An audit covering the 2012-13 fiscal year that ended July 31 said the hospital ended the year with a cumulative debt of $12.1 million.
Follow Richard Thompson on Twitter, @rthompsonMSY.