Case study: Admissions drop makes $58M expansion a burden for MA hospital

Two years ago, Plymouth, MA-based Jordan Hospital was just taking the wraps off of its plush new $40 million, 91,000 square foot pavilion, complete with operating rooms, a radiation treatment facility and imaging equipment. At the time the pavilion, part of a $57.5 million renovation, was seen as the hospital's move into the next level of success.

Now, however, the plan's timing seems a bit off, at best. Not long after Jordan launched the pavilion, admissions fell substantially, and for this fiscal year, admissions are off about 9 percent from the previous year. Worse, the hospital seems likely to post a loss. This situation has bond analysts on Jordan's case. Standard & Poor's downgraded Jordan's bonds to BB- in June, well into junk bond territory, and issued a"negative outlook" on the hospital.

What has the bond analysts worried is that Jordan borrowed $49 million for the expansion, pushing its total debt to $84 million. The problem is that with admissions down, revenue has fallen to 200 levels. Meanwhile, the hospital lost $933,000 on its healthcare operations in its last fiscal year, though it made a small profit with investment income. And with only $21 million in cash and investments, it doesn't have much on hand to offset the big debt.

In an attempt to cope, the hospital's new CEO, Peter Holden, has eliminated 3 percent of the staff and slashed expenses like travel to conferences, bottled water and even free coffee. He's expecting that these measures will allow the hospital to cut its expected annual loss for the current fiscal year to $1.3 million. More importantly, longer-term strategies--such as acquiring a now-unprofitable primary care practice--seem likely to pay off over the next few years, observers say.

For more background on Jordan's turnaround plans:
- read this piece from the Boston Globe

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