Will they buy it? MHCC asks Natrona County commission to back revenue bonds as officials search for ways to buy Summit Medical building

As expected, the Natrona County commissioners didn’t take any action last week when officials from Memorial Hospital of Converse County asked them to issue $32.45 million in revenue bonds so the Douglas hospital could buy the building where its Summit Medical Center resides.

The sales price of the building is $29.2 million, but MHCC said the other $3 million is equal to one year of bond payments to be held in reserve. MHCC wants to remodel/expand the Casper east-end facility but cannot do so until they own it rather than lease it.

The tone at that first meeting Aug. 19 cut into the optimism MHCC leaders had hoped to hear, though they remained hopeful that “plan A” for buying the building would eventually come to pass, they said. (That funding option is the preferable one, but MHCC has others in the wings if they are turned down eventually. Other options involve private loans with higher interest rates, or some type of self-purchase coupled with loans.) 

Just days after that first meeting, however, the Natrona commissioners scheduled MHCC to return for further discussion. MHCC Board Chairman Bob Kayser said the next meeting (Sept. 2 in Casper) may actually get into the nitty-gritty details of how a the hospital revenue bonds work and how this could benefit medical services throughout Natrona and Converse counties.

The “ask” at the August meeting was basically preliminary overview to gauge if the Natrona County Commission had any interest in helping MHCC purchase the Summit building. Kayser said there seemed to be some reluctance, especially since not too long ago they turned down a request for bonds from Banner Health, which owns and operates Wyoming Medical Center – Summit’s chief competitor.

In a subsequent interview, Kayser said, however, that as much as they are competitors for some medical services in central Wyoming, WMC relies on MHCC and Summit as feeder programs for more specialized services that it offers but the others cannot due to their size.

“The biggest (obstacle noted at the Natrona meeting) is that Banner apparently approached them to issue the same sort of revenue bonds and they turn down Banner, so it’s logical (to ask) why would we turn down Banner but approve yours,” Kayser said immediately following the meeting last week.

“Our request is bigger than Banner’s, so I just don’t think (they will) be able to come to a conclusion soon. I think they’ll continue to consider it but I don’t know what the process is to move it ahead. The ball is in their court, and they need to decide if this is something they want to support or not support. I think it’s complicated for them.”

He then said he didn’t expect a follow-up meeting or a decision soon. But not long after Kayser’s statement, the Natrona commissioners put MHCC on the agenda for their Sept. 2 meeting.

Kayser said he isn’t sure if that is a positive or negative overall, but he’s planning to invite MHCC’s bond experts to help answer detailed questions.

In general, a revenue bond can be issued by a county or city and are marketed to investors, generally long-term investors like insurance companies, banks and Wall Street types, though grandma could buy some, too, he said. The bond principal and interest are repaid by the industry requesting them. In this case, MHCC would repay the bonds from its revenues at Summit, though MHCC as the parent of Summit, could potentially be liable for some costs if Summit failed to generate enough income to pay the bonds.

However, Kayser and MHCC CEO Matt Dammeyer said Summit Medical generated a significant cash for MHCC in the last year, and their costs (before profit was calculated) included lease payments which are about the same amount as bond payments would be.

Most recently, the MHCC board received the year-end financials for Summit that showed a positive $7.1 million net (EBITA), with a $5 million net after the noncash depreciation and amortization deductions are made. In other words, Summit “made” MHCC about $7 million in its first full year of operation as a subsidiary of MHCC.

Another key aspect of revenue bonds is that the sponsoring government entity – in this case Natrona County – is not liable for repaying the bonds. The bonds are secured only by the net revenues of the hospital, in this case Summit Medical Center.

Kayser said MHCC would not be liable for the bonds, only Summit Medical Center, LLC, and the buyers of the bonds understand the risk they are taking but they received tax-free income.

Many large projects in eastern Wyoming often rely on county-issued bonds to shoulder part of a project’s costs, and some counties have issued similar bonds. The Converse County Commission has backed a few, with two for MHCC expansions. The first was to add a wing and remodel the current main hospital; the second was for the Medical Office Building on East Center Street, where the walk-in clinic and most physician offices are located.

Kayser said MHCC paid both of those bonds off early using additional revenues that were generated because of the expansions. It also allowed MHCC to invest its earnings and make interest from them while paying the bonds with revenues; in the latter case, that meant MHCC had a 1% spread on the loans (meaning the loans cost them 1% more than the interest they were earning on their money). That concept is behind them asking Natrona County to support the bonds to buy Summit because it keeps the interest rate low while allowing MHCC to invest revenues from Summit or to use those funds for other projects – among them, presumably, are plans to expand Summit into a full hospital with an emergency department, more in-patient beds and space to bring all its five speciality clinics and multiple practices it has in Casper into one location.

MHCC purchase Summit Medical Center operations in October 2022 for $24.6 million. They currently employ 203 people in Natrona County and have about $140 million in service charges, Dammeyer and Kayser said.

MHCC did not purchase the building at the time, though they intended to all along, they said. The facility is still owned by Summit Medical Properties, LLC and is leased to MHCC through its subsidiary, Summit Medical Center LLC. The lease is good for 15 more years.