By Traci Chapman

City Council members approved a $2.45 million loan needed to infuse cash and consolidate Parkview Hospital’s obligations – contingent on a committee asking for proposals for a possible lease of the hospital by outside organizations. The action came at Tuesday night’s regular Council meeting.

Council members approved the execution of documents which will allow Parkview to move forward with the consolidation loan. Hospital board members had approved the proposal by lead bank Canadian State Bank the week before Council met. The Department of Agriculture would provide a guarantee for 80 percent of the loan, CSB president Doug Tippens said.

Council member Bobby Don Stevenson said he wanted to look at “another option” in order to determine the value of the hospital. Stevenson’s comments followed a presentation by Parkview board chairman David DeLana.

“I wonder if there’s another option here,” Stevenson said. “I think the time has come to look at possible outside leasing.”

Council unanimously approved a motion by Dr. Kent Carder allowing execution of lease assignments and “any other documents” needed to move forward with the CSB loan with the contingency that requests for proposals will be sent to companies interested in looking at the hospital and analyzing its worth. Carder also included in his motion a stipulation that Mayor Matt White, City Attorney Roger Rinehart and DeLana serve as an investigating committee to review RFPs submitted to the city.

White said he had spoken to St. Anthony Hospital officials and representatives of Mercy Hospital and both expressed interest in El Reno. White said Thursday Council members are obligated to look at the entire picture and determine what’s best for the hospital and El Reno area residents.

“This hospital doesn’t just cater to El Reno – we serve people in Hinton and Geary, as well as a large rural area. We want to expand that hospital and to grow that hospital. We can’t keep doing the same thing,” White said. “We want someone who can take this to the next level so we can offer the best health care available to the people who rely on Parkview. Hopefully, RFPs will tell us what it’s worth.”

The loan will consolidate the hospital’s existing letter of credit with Vermont Insurance Department, as well as “about 40 Uniform Commercial Code filings” the hospital has pending with various lenders for the purchase of equipment and supplies, Tippens said at the earlier Parkview board meeting. That letter of credit expires Sept. 14, White said, causing a situation where Council members and hospital board members are now “under the wire.”

The $161,904 letter of credit is crucial to the hospital, Administrator Lex Smith said, because it provides the liability for the hospital. If that insurance were to lapse, Smith said programs like Medicare and Medicaid would not be available at Parkview. Mid-First Bank currently finances the letter of credit – held by the Vermont Insurance Department as collateral for the hospital’s self-funded insurance plan – and advised hospital officials it would not renew the financing in April, Smith said.

To obtain the financing, Parkview must pledge its “equipment, inventory, receivables and rights to payments,” as well as give an assignment of its lease with the city of El Reno. Tippens said the hospital’s options are limited because it has run in the red the last two years and due to the large number of filings on its equipment. Vendors file UCC statements to collateralize equipment, which constitute a lien against that equipment.

Smith said the 10-year loan would also infuse needed cash flow into the hospital. Board member Ron Ward said at the hospital board meeting the consolidation will net the hospital about “$23,000 in additional cash flow” initially.

After four years, however, the benefits to the loan will reverse, and what provided a positive infusion of cash will begin to cost the hospital “big money” if the loan is not paid before that time.

“The first two years is the big benefit, and in year three it pretty much becomes a break-even situation,” Smith said at the earlier meeting. “After that, it goes into the red.”

“I think it’s important to understand that we’re looking at a combination of things – the structure of that note could vary,” he said. “For example, we have a number of capital leases at 4 percent. If we got a note at 7 ½ percent, we might be better off paying off those capital leases.”

Tippens said at the Parkview meeting, consolidating the hospital’s outstanding obligations with the proposed loan, which has a ceiling of 9 percent, would save the hospital more than $280,000 in the first year. That benefit would decrease to $214,204 in year two, $136,559 in year three and $29,812 in the fourth year. Year five paints a much different picture, Smith said, with a loss of $232,332 if the loan has not been paid off or restructured by that time.