MedWest-Haywood line of credit extended
MedWest-Haywood officials have decided to pay bills instead of worrying about repaying a line of credit extended by Carolinas Healthcare Systems.
In a meeting with the Hawyood County Board of Commissioners Monday, John Young, vice president of the western division of the Charlotte-based medical group, said MedWest-Haywood’s accounts payable had been as high as $15 million and were now down to $11.2 million. An acceptable “working number” for accounts payable would be around $9 million, Young said.
The $10 million line of credit Carolinas Healthcare extended to MedWest-Haywood one year ago was not only to be used to pay for unexpected and capital costs, but was intended to be a “safety net,” Young said.
“It was always intended that within that loan, even though it’s year by year, we would re-up that line of credit,” Young said.
If the hospital had used the entire amount, paying it back in a single year would be a hardship, he said. The current amount used is $8.6 million.
“We have chosen to not pay that back in a hurry,” Young said. “We need other things first.”
Meanwhile, it would be ideal if someone in the financial lending business would step forward to provide a line of credit that is needed in a business the size of MedWest-Haywood, Young said, but until then, “we will keep doing it until it is not needed.”
The line of credit was initially secured by real property in Haywood, both the hospital facility and the health and fitness center, as well as the accounts payable from all MedWest operations. The MedWest-Harris and MedWest-Swain operations have since been released from the obligations. The interest rate is prime plus 1 percent, which puts it in the 5 to 6 percent range, Young told the board.
Carolinas Healthcare, which has a management agreement with MedWest, extended the loan in an unprecedented move for the organization because there were pressing financial needs and other lending sources wouldn’t take the risk. At the time, Young said part of the reason for the loan was that MedWest was a relatively new organization, formed just three years ago through an affiliation of medical providers in Haywood, Jackson and Swain counties without much of a credit history, and because Carolinas was “bullish” on the hospital and what it has to offer to the community.
The line of credit pay-down has been a moving target through the year. In May, former MedWest-Haywood CEO Michael Poore said the line of credit should be reduced to $2 million by the year’s end. In August, Young said it was hoped to have the line of credit had been whittled down to $6.8 million and should be reduced to the ‘mid-5s” by September.
Commissioner Kirk Kirkpatrick suggested the term be two years, which would prevent the need to get approval not only from the hospital and county governing boards, but also through the N.C. Local Government Commission.
The commissioners approved the extension and the matter was to be considered by the state agency that oversees all government-related loans the following day.