Private financing not a practical hospital option

opinions

August 20, 2010 - 12:00 AM

Dr. Darrell Monfort advised the Allen County Commission this week to get out of the hospital business and ask local investors to build a private hospital and pay them 4 or 5 percent interest on their investments.
This is not a practical suggestion.
Counties, cities, nationwide churches, very large charitable organizations and very large private corporations build almost all of the modern hospitals in the United States today for several reasons.
First among these is that a lot of money is needed up front. The consultants hired by the county to study its hospital needs estimated that a new hospital of adequate size and modern design would cost about $30 million. They proposed that the money be raised through the sale of bonds guaranteed by the county. The bonds would be retired with sales tax income and any profit realized.
Bond financing would be the only way that Allen County could build a hospital within an acceptable time frame. As the consultants advised — and local physicians and other health care workers confirm — Allen County Hospital should be replaced with an up-to-date hospital as soon as possible.
It is not reasonble to assume that $30,000,000 could be raised from local investors, particularly if there were no way to guarantee that interest would be paid on the investments from the time that they were made — or ever, for that matter — and that the investments themselves could be cashed in on demand by investors, as publically issued bonds can be. Guarantees at that level can be made only by governmental units, corporations or organizations such as the Shriners, which have the assets required already at hand.
It should be equally obvious that an ad hoc group of investors without experience or standing in hospital financing, construction and operation would not be able to go to financial markets and borrow the millions needed to accomplish their purpose.

THE THOUGHT that a modern hospital could be built and operated by an organization of “private investors” that does not now exist is attractive because those imaginary benefactors would make it possible for Allen County to have a modern hospital without having to pay for it through taxes or to guarantee payment of bonds issued — a delicious free lunch.
But there simply is no proof that this has been done or could be done.
This is not being written to bash Dr. Monfort, but to point out that a detailed, practical plan to move Allen County from talk to action on this critical need has been carefully constructed and will be put before the people for approval in November. Several well-advertised public hearings have been held. Every stakeholder and every citizen, has been given many opportunities to make suggestions and offer input. Top-of-the-line experts have provided their advice and made detailed proposals. All reasonable options have been considered.
This is not the time to go back to square one.

— Emerson Lynn, jr.

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