HJ Sims Leads Financing for Replacement Critical Access Hospital
We were very fortunate to be able to bring in and work with Jimmy Rester and the team at HJ Sims. We found Jimmy Rester and his team to be professional, intelligent, helpful, and willing to pivot or change to get the job done. They truly became part of our team and were integral in getting us to the finish line on the financing of our replacement hospital. To have a partner like Jimmy and the team at HJ Sims was assuring to me and our Board while we went through the ups and downs of the bond financing process. I highly recommend HJ Sims.
David Caston, CEO, Reeves Memorial Medical Center
Founded in 1967, Ward 3, 4 and 10 Hospital Service District #1, the Parish of Union, State of Louisiana doing business as Reeves Memorial Medical Center (“RMMC”) is a critical access hospital located in Bernice, Louisiana. RMMC offers general acute care services, radiology, swing bed program, 24-hour emergency room services, pharmacy, ancillary services, outpatient therapy, a rural health clinic, and other outpatient services.
HJ Sims was engaged to assist RMMC in evaluating various plans of finance for financing a replacement hospital located near the current campus. The new hospital will accommodate the increasing demand for outpatient services, will allow for new services to be brought to the area, will better meet the demands of swing bed services, and will bring RMMC up to date in space design and technology.
Initially, the financing plan considered utilizing one of the United States Department of Agriculture (“USDA”) loan programs. However, due to escalating construction costs, pursuing USDA financing would have been time prohibitive. Consequently, HJ Sims, in collaboration with RMMC management, opted for an unrated tax-exempt bond financing.
Designated as a (“CAH”) in 2005, RMMC benefits from a 101% cost-based reimbursement for allowable costs on inpatient and outpatient services for Medicare and Medicaid beneficiaries. Additionally, hospital capital costs apportioned to Medicare patient use (including depreciation and interest) are paid by Medicare on the basis of a standard federal rate (based upon average national costs of capital), subject to limited adjustments specific to the hospital.
As the financing progressed, as part of the financing process, the financing team identified several areas that could be value engineered. As a result, RMMC was able to realize significant cost savings. Further, given TEFRA constraints, the par amount of issuable bonds was relatively firm. Given the historically strong management of RMMC, the hospital was able to contribute significant equity to financing, both in the form of pursuit monies and future costs.
On December 14, 2023, HJ Sims successfully closed a $28 million tax-exempt fixed-rate bond issuance to fund the construction of the replacement hospital. Despite the ongoing turbulence in the fixed-rate bond market, and limited public issuance of CAH debt, HJ Sims successfully attracted investors, including a local bank, to purchase the debt. The final maturity is 2053 with an optional redemption in 2030.
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