By Reann Huber
This month’s hospital authority meeting was focused on a financial feasibility study presented by guests from the Dixon Hughes Goodman (DHG) accounting firm. The study looked at the history of MMH’s finances and characteristics of the service area to create the projections for the expansion of MMH.
The two guests from DHG, Jeff Booth and Randy Medlin, both have extensive experience with the healthcare financial industry and provided a simplified overview of the proposed financial feasibility study for MMH.
“We have worked with the Morgan team for a number of months and you will see in our opinion that we state that the project is feasible,” Booth said.
Booth and Medlin focused on three financial indicators that they believe users will be most interested. The three reports included operating margin, days cash on hand, and debt service coverage.
As for operating margin, it will be negative for the first few years due to hiring new physicians, the ramp up time to start generating revenue from these new physicians, as well as construction costs. From their projections, Medlin said there is a projected 1.32 operating margin by 2019.
Days cash on hand will increase as well from all the fundraising taking place, but will increase more once the project has been completed.
With debt service coverage, it will be strong starting from 2016 into the next three years as there is no interest during construction time. By 2019, the debt service coverage will be at 1.62 and should increase with other trends they projected.
The total project cost, including the hard costs of construction and soft costs of interest, is $36,354,539. The plan is to use a USDA Community Facilities Direct Loan of $35 million, but there is expectation of fundraising for $1.3 million to be applied to the total project costs.
“The fundraising actually is expected to be a little over $2 million,” said Medlin. “The fundraising portion will cover all the cash requirements to meet the total project cost in addition to the USDA loan.”
As for the regular financial update, Kyle Wilkinson, MMH CFO, ensured that they are continuing to due well financially with fiscal year 2016 with a net income of $46,570. Wilkinson said that everyone is doing a great job with controlling operating expenses by being $102,000 under budget this past month.
According to Wilkinson, even with the project costs, the expansion of services will result in increased patient volume and net revenue growth, which will help aid uninsured charges that continue each year.