ODDS OF SURVIVAL: 20%
Interim Northern Inyo Hospital District (NIHD) CEO Stephen DelRossi gave a grim update to Inyo County Supervisors about the financial state of the hospital district at the Supervisors meeting on Tuesday in Independence.
DelRossi told Supervisors there’s an “80% chance we close” without some sort of taxpayer bailout.
“Every time we turn over a rock,” he said, “we find 10-12 other rocks.”
DelRossi said the district lost about $15 million in fiscal year 2021-2022 and is poised to lose at least that much in 2022-2023.
It has approximately $22-23 million cash on hand, but owes just as much to its bondholders.
He described the bondholders as “very understanding” but also noted they have the option to call the bond on July 1. “They do not want to force us into bankruptcy,” he said, but could effectively do that by calling the bond.
As of December 31, 2022, Northern Inyo Hospital District had a ‘B+’ bond rating. This places the district in the bottom 5% of all U.S. Not-For-Profit Healthcare Providers according to Standard and Poor.
By comparison, Southern Mono Healthcare District has an ‘A-‘ rating, which is essentially middle of the pack.
There are a whole slew of BBs and BBBs in between.
BBB- is considered the lowest investment grade rating.
Meanwhile, NIHD currently has unfunded pension liability of $47.7 million.
“People’s retirements depend on this hospital remaining open,” observed DelRossi.
The Math
DelRossi said the District began cost-cutting in earnest beginning in September 2022 and had eliminated 55 FTE (full-time equivalent) employees by April without any reduction in service. “We were absolutely overstaffed,” he said. To lay off 55 without a loss of service is testament to this.
While patient flows have remained consistent, DelRossi said payroll even now stands at 125% of net patient revenue.
Another issue is payer mix. 35% of patients are on Medicaid, which reimburses the District .74 to .76 cents for every dollar.
Another 45% are Medicare patients, who reimburse at cost plus 3%. Hardly a path to solvency.
So is there an opportunity for NIH to grow its way out of its predicament? Cardiology may be one path, said DelRossi. A visiting plastic surgeon may be another. Anything to grow services without increasing cost.
In the meantime, DelRossi continues to hunt for savings. One bad deal he’s discontinued – mobile trailer rental. He said the District has been paying $25,000/month to rent trailers which may have cost a few hundred grand at the time to place.
The estimated rent the District had paid on these trailers over the past 15 years or so: $4.58 million.
The District will renovate the Pioneer Medical Building to make up for the lost space.
The District has also “unaffiliated” itself with Pioneer Home Health and the Bishop Care Center to reduce its financial exposure.
Tax Hikes?
DelRossi laid out four possible future scenarios for the District depending upon the public’s appetite for tax increases.
1. He suggested a local $10/night bed tax (on top of the already existing 14% visitors pay in Transient Occupancy Tax and the Bishop Tourism Improvement District). He estimates this will raise $2.5 million/year in revenue.
2. A property tax increase (requiring voter approval).
3. Do nothing and head to bankruptcy.
4. Gut the hospital and limit operations to life-saving services only.
What’s Next?
DelRossi promised public outreach.
*And maybe when that outreach occurs, he’ll be accompanied by a few board members, who were conspicuously absent on Tuesday.
As Supervisor Jeff Griffiths observed, “There needs to be a large uptick in public awareness.”
Griffiths doubts the community will agree to bailout tax measures at this time. They need to trust that the organization will deliver, he said.
As DelRossi said, NIH is just now digging out after “10, 12, 15 years of neglect.”
“We’ve had negative operating income for the past decade,” he said, which has been papered over by cash flow and a one-time pandemic injection of capital.
