WhidbeyHealth officials reassure after ratings drop

WhidbeyHealth contends credit opinions make the district’s finances sound more dire than reality.

Officials at WhidbeyHealth contend that Moody’s Ratings recent credit opinion and rating action makes the hospital district’s finances sound more dire than reality.

In fact, hospital CEO Nathan Staggs said the leadership is asking the credit rating agency to reconsider the ratings downgrade based on more complete information that the hospital is providing to ratings analysts.

“What they do with the information will be up to them,” he said.

Staggs added that the district isn’t currently in danger of being unable to make payroll, as nearly occurred during a financial crisis two years ago.

Still, the district is operating at a deficit, which Staggs said is a result of costs from a new electronic records system and new staff, as well as a delay in collections after moving to a new clearinghouse.

Moody’s rating action was significant. The company downgraded to B1 from Ba3 the hospital district’s Unlimited Tax General Obligation Bonds, affecting about $43.9 million. Moody’s also downgraded to Caa1 from B3 the district’s Limited Tax General Obligation, affecting about $11.9 million.

In addition, Moody’s removed the stable outlook and placed hospital ratings on review for possible further downgrade.

“The downgrades primarily reflect the hospital’s severe and immediate liquidity challenges that raise the risk of the district becoming insolvent within months unless the district is able to secure significant additional liquidity,” Moody’s reported.

Moody’s warns that even minor financial disruption could further deteriorate the hospital’s ability to pay its bills.

Hospital Chief Financial Officer Paul Rogers said the downgrade may not have any direct impact since the hospital isn’t currently looking to borrow money anytime soon.

Yet the budget is undeniably tight. The hospital lost $110,000 through February and is budgeted to continue to run at a loss until June, when things should begin to turn around. The hospital is projected to end the year with a surplus of $200,000, he said.

The hospital went from 39 days of cash on hand six months ago to just five days at the March 21 board meeting. On Monday, it was up to 17 days, the hospital reported. “Cash on hand” is a measurement of the number of days an institution can cover its costs without any additional revenue.

Staggs explained that there are several factors that converged to cause the district to run at a deficit, albeit temporarily. The hospital is moving to a new electronic medical records system, which was a $4 million decision made in 2021. The project is costing the hospital about $300,000 a month, Rogers said.

In addition, Rogers said the hospital is investing in staff and adding services, which is a decision that will cost more in the short term but save in the long run, in addition to improving medical care on the island.

He said the hospital is moving away from temporary providers — traveling nurses and locum doctors — which are much more expensive but were necessary during the COVID years.

Staggs reported that the hospital hired 14 providers in the last 12 months. The district started a behavioral health clinic and urology services, which have been absent from the island’s medical options.

He said it will be some months before the new providers begin to “earn their costs.”

In addition, Rogers said an increase in the wage scale for nurses and others will have long-term benefits.

“It will help us in terms of recruiting talented, experienced staff and retaining those we have,” he said.

Staggs said the hospital’s decision to move to a new clearinghouse delayed the collection of claims temporarily. Claims were out 67 days at one point but are now down to 56 days; the goal is 40 days, he said.

Yet perhaps the hospital’s greatest liability is its $70 million in long-term debt, which is sizable for a district with an annual budget of $130 million. The hospital employs 750 people, which makes it the county’s second largest employer.

Staggs said the hospital is considering hiring a grant writer to help capture more government dollars.