AgStar Financial Services employees Bob Madsen and Aaron Knewtson met with the hospital board on Thursday, January 23 to discuss ways to possibly finance renovation of the Cook County North Shore Hospital (CCNH) and Care Center (CC).
Over the last year the hospital board has been contemplating upgrading the care center and organizing the space in the hospital to more useful and hopefully more profitable purposes.
Hospital Administrator Kimber Wraalstad said, “Everything is in very preliminary stages right now. There are no schematic designs or set plans. We are looking at spending about $20 million, but we have many questions that need to be answered first before the board can make any decision.”
The hospital board will meet with two architects on January 20 and will meet again on February 10 to discuss, “whether to continue the process and if so, to hire one of the architects to make preliminary drawings,” said Wraalstad.
Some of the areas that need addressing, said Wraalstad, include combining the hospital and care center nurses stations so that they could more easily share staff; make all of the patient rooms in the hospital and the care center private with their own bathrooms; re-configure the emergency room (ER) to make it more private; extend the radiology room; add (potentially) a pharmacy area so the pharmacists could mix medicines at the hospital; consolidate and minimize the many entrances to the building to make it more safe and more customer friendly; and make a procedure room for outreach doctors who come on a weekly/monthly basis to see patients.
“There are probably many more things that will come up, but that’s a preliminary view of what we are looking at right now,” Wraalstad said.
AgStar has provided support and assistance for most hospitals in the Northland that have undergone recent remodeling projects, said Madsen.
During the last three years Madsen said that AgStar has worked with six replacement or major hospital expansions in the Northland, among them the Northern Pines Medical Center in Aurora, Community Memorial Hospital in Cloquet and the Moose Lake Hospital.
AgStar Rural Capital Network is an $8 billion lending institution that works within the Farm Credit System and offers interim financing for essential community facilities with a USDA direct loan takeout as permanent financing.
Madsen said AgStar invests in rural businesses like hospitals, care centers and assisted living facilities as well as commercial businesses, and multi-family housing.
AgStar also offers access to longterm fixed financing, said Madsen, and will provide reduced financing fees compared to placement agents, and because of their experience, can provide all of the necessary help with the facilities construction financing.
But, said Knewtson, “AgStar is not a part of the U.S. Department of Agriculture. We are completely separate entities but we work well with them. We do not charge a fee for our services,” he said, but they do take a percentage of the loan as their pay.
Knewtson said that right now it looks like the hospital/care center could qualify for a 30-year fixed rate USDA direct loan of about 4.5 percent through the USDA Community Facilities program. This is a federal government program that ensures that capital is available to facilities that are “essential” to a rural community, said Madsen, and is the most popular financing mechanism for rural hospitals in the market today.
Terms of loans are typically 30 months for construction and 30 years for financing, Madsen said.
The USDA would require that the hospital/care center provide between 10 and 20 percent of the financing, said Wraalstad. “That would be 2 to 4 million of our dollars that we have in capital reserves.”
Before any further action can take place Wraalstad will have to complete a USDA pre-application and submit it to the USDA. Madsen told the board that AgStar can assist with the USDA Application process at no charge, and he added that this is quite a lengthy document that for a one-time user. “It’s very difficult to fill out without help.”
Wraalstad said another preliminary step—if the board continues to proceed— is to hire a CPA firm to conduct what is called an Examined Forecast at a cost of $35,000 to $40,000. This document, said Wraalstad, will give them an idea if it is feasible or prudent to go forward.
After Madsen and Knewtson left, board member Thomas Spence asked Wraalstad if she was comfortable working with AgStar.
“Absolutely. They’ve been very good to work with. They are very knowledgeable and helpful,” she said.
Board member Howard Abrahamson said, “I guess what the board is saying to you is, do you want to work with these people to develop the financing for the hospital and care center?”
“Yes,” said Wraalstad, and the board gave its approval for her to move forward with the process.
In other hospital matters:
. Once again the board approved hiring McGladrey & Pullen to perform the fiscal year ending 2013 financial audit of the hospital and care center at a cost not to exceed $20,500, an increase of $325 over the 2012 audit cost.
. The board designated the Grand Marais State Bank as the hospital and care center’s 2014 bank for daily deposits of daily receipts and the withdrawal of accounts payable and payroll expenses.
. Wraalstad introduced new Director of Finance-Controller Vera Schuman to the board. Schuman started December 30, 2013 and has been busy learning the financial process and the names of fellow employees. Currently she is focusing her efforts on management of the revenue cycle, noting that old bills weren’t being collected as aggressively as they could be.
“We have old stuff that’s not being collected. It will take some time to do some cleanup and improve our efficiency, but we’ll get there” Schuman said.
Schuman gave a brief year-end financial report. She said the hospital/care center showed a loss of $797,782 from 2012, and said that acute patient days were down 27.4 percent and patient days in a swing bed were down 56.4 percent from 2012.
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