PVHP presents projections

Six months since the Platte Valley Healthcare Project (PVHP) first introduced the Valley to accounting firm BKD, partners Joe Watt and Eric Lopata returned to present projected feasibility numbers during a public meeting on Aug. 14. It was originally intended for those numbers to be presented during the July 17 meeting, but the presentation had been pushed back. Former and current members of the Memorial Hospital of Carbon County (MHCC) Board of Trustees and MHCC interim Chief Executive Officer (CEO) Bob Quist were in attendance as numbers were presented.

A look At The Numbers

Watt began the presentation by informing the audience that BKD’s role in the feasibility study was to take data provided to them by the PVHP, Corbett Medical Foundation and Health Management Services (HMS) and compile it into financial statements. The projected numbers, as presented by Watt and Lopata, included the assumption of 80 percent funding by the United States Department of Agriculture (USDA) and 20 percent community support; private contributions, equity contributions or local financing.

“For purposes of the feasibility study, the assumption is that that 20 percent is going to come through local contributions, private contributions, and … that’s going to come to about $4.5 million,” said Lopata.

Other numbers presented to the audience included a projected two months of cash on hand, how long the facility can run should operations cease, approximately 65 percent of Medicare utilization, a projected annual revenue of $9 million, nearly $500,000 in operating losses each year and $600,000 in cash flow.

With the operating loss, BKD pointed out that part of that projection included depreciation and amortization, or fixed loan payments, of the building and that it was a non-cash line item. 

“One of the keys to this whole model is, when you build a new facility, you are getting reimbursed on that depreciation. So, it is common to see that operating loss, but have that positive cash flow,” said PVHP acting chairman Will Faust.

Quist was quick to cast doubt on the projected numbers, stating he believed the revenue presented to be inflated.

“I say that because the revenue that we receive out of the Platte Valley for services is $6 million a year. So, there is no way that you’re going to see revenue at $9 million in a significantly reduced scope hospital. No OB, no ICU, several other services, no surgery. None of these services and yet they’re projecting revenue above what we’re seeing right now,” said Quist.

President Karl Rude was quick to defend the numbers, stating that they had been projected using only the services the proposed critical access hospital would provide, along with the current numbers at the Saratoga Care Center. In back and forth between Quist and Rude, it became clear that the $6 million originally quoted by Quist covered all services and that it was only $2 million worth of in-patient services that left the Valley for Rawlins.

Encampment resident Sandy Streeter, near the end of the questions on the projected feasibility presentation, stated that she was having a “tough time” with the $6 million quoted by Quist for revenues from the Valley and the $9 million quoted by BKD.

“It would be nice if somehow we could get a better explanation from each of you, maybe with some breakdowns, so we could see where the discrepancy is and it will make a lot more sense to us,” said Streeter.

Taxation vs Donation

As the audience asked multiple questions concerning the projected financials, one question from Saratoga resident Glee Johnson raised the issue of taxation for hospital revenue as opposed to donations. Johnson asked if it had been considered to form a rural health care district as opposed to a non-profit group in pursuit of the critical access hospital.

In February, BKD explained that a rural health care district, as a tax district, was one possible option in generating revenue for the hospital (see “Healthcare a tax issue?” on page 1 of the Feb. 20 Saratoga Sun).

“I asked early on what the capacity was for a community to take on a hospital district. Putting together a medical services district in the state of Wyoming is to put together a taxable district to support an entity of medicine by collecting taxes from the citizenry. We had looked at that and I had raised it on several occasions in early conversations with people and it was very, abundantly, clear that there was not going to be a liking for putting together a tax district to support what we had here,” Rude said. “It was considered, but not pushed forward and, essentially, what I was told was people would want to be generous to give to support, but they would not want to be obligated to support.”

In place of revenue from a tax district in support of the hospital, BKD instead placed 25 percent of annual charitable donations received by the Corbett Medical Foundation. According to Rude, that number came to $50,000. The president of HMS further explained it was used as a conservative number in an attempt to show that the critical access hospital could stand on its own. 

“What we’re saying is; without taxes, and with very reasonable, modest donations—right on 25 percent of what it’s (Corbett Medical Foundation) raised historically—it will make that positive cash flow while not fully funding depreciation,” said Rude.

The next meeting of the Platte Valley Healthcare Project committee will be at 5:30 p.m. on Sept. 11 at the Platte Valley Community Center.