Prince George’s says it will cover hospital system bond debt to help win state approval

September 18, 2013

The Prince George’s County Council is expected to approve spending millions of dollars to help cover Dimensions Healthcare System’s debt, as the company seeks to convince state regulators that its plans to build a $645 million regional hospital are financially sound.

The council is scheduled to take a final vote Oct. 1 on the plan, which would allocate $5 million annually, for at least five years, tocover interest payments for Dimensions’ bonds. The vote would come a few days before Dimensions must submit its application to the state for the new hospital. The council signaled unanimous support for the plan in a straw vote Tuesday after discussing it last week in a closed-door session with top aides to County Executive Rushern L. Baker III (D).

Dimensions — a not-for-profit organization that operates Prince George’s Hospital Center and three other sites in Prince George’s — is taking steps to show state regulators that it can cover its $74 million pension liability, top hospital officials said.

“This had to be done,” said C. Philip Nichols Jr., who chairs the Dimensions board and is part of a team of county leaders working to secure state permission to build the new hospital.

The new hospital, scheduled to open in 2017, and an affiliated primary-care medical network are slated to become part of the University of Maryland Medical System. But the university medical system refused to do the deal if it had to take on any Dimensions debt. Dimensions, which serves many low-income and uninsured patients, has been losing millions of dollars for several years. Its annual operating budget is about $350 million.

Fearing that the deal would fall apart, county officials have said they had to step in.

Baker, who helped broker the 2011 agreement for the 259-bed hospital, said the county’s payments would be worthwhile. He expects that with the expertise of the Maryland medical system, the new hospital and the network of health-care providers would improve the health of county residents and reduce demand for costly emergency-room care.

Recent studies have found substantial cause for concern about the health of the nearly 1 million residents in majority-minority Prince George’s. Residents suffer disproportionately from diabetes, heart disease and obesity, and the county suffers from a shortage of primary-care medical practices.

The new hospital is expected to serve Prince George’s and Southern Maryland, and it would replace Prince George’s Hospital Center in Cheverly, a designated trauma center. The Cheverly hospital has long served as the primary health-care provider for many county residents, a system that county and state officials have said is not sustainable.

Neil J. Moore, president and chief executive of Dimensions and its former chief financial officer, said the company is making strides toward reversing losses and is paying down its pension liability by allocating $14 million to $17 million annually. Moore said the company has been able to bolster its pension plan by cutting costs and by stepping up collection of debt it is owed by vendors and insurance companies.

Even with those payments, the remaining unfunded pension liability would total about $40 million if the new hospital opens as expected in 2017, he confirmed. Moore said he is examining ways to cover those costs.

“Sometime between now and then, we will develop a plan,” Moore said.

Prince George’s and the state have for several years tried to keep Dimensions afloat by pouring $30 million annually into the company, and officials expect to continue those payments for a few more years. Officials hope the need for public subsidies will taper off because the hospital is expected to become self-sustaining by offering high-end specialities, and attracting more patients who can pay for care.

If the council approves the debt plan as expected, Prince George’s will begin in July to redirect $5 million of its $15 million annual contribution to Dimensions to cover interest payments on Dimensions’ $46 million in bonds, said Tom Himler, a top Baker aide.

Dimensions’ application to the state to build the new hospital is expected to be submitted by Oct. 4. Last month, the Dimensions board endorsed Largo Town Center as the site for the new hospital, a move that county officials said would save tens of millions in infrastructure costs over a proposal from the Lerner family for its Landover Mall site.

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