Tulsa hospital weighs options to raise money to avoid insolvency

Journal Record, The (Oklahoma City), Dec 13, 2000

TULSA (AP) -- A Tulsa hospital grappling with debt and a tight supply of funds is looking to jettison a partnership at another hospital to help raise money and stave off possible insolvency.

Hillcrest Healthcare System is considering selling its interest in SouthCrest Hospital in south Tulsa as part of a strategy to raise cash. Hillcrest is also seeking $20 million from the state to help pay for indigent care.

A report from Moody's Investors Service said without a cash infusion "insolvency may occur" for Hillcrest.

Hillcrest had about $35 million cash on hand at the end of September, or less than a month's worth, to pay employees, electric bills and other overhead expenses, according to a report in the Tulsa World.

Hillcrest has about $240 million in outstanding debt. Its $39 million in short-term debt includes some "demand line" debt that can be called for payment at any time.

"That's the card that could bring the whole house of cards down," said Dennis Farrell, manager for health care ratings at Moody's.

Moody's recently downgraded Hillcrest's debt six notches -- from Ba1 to B3 -- to signal higher risk for investors planning to loan money to the organization. Moody's downgraded Hillcrest's debt to Ba1 in July.

The B3 rating is for companies that could be near bankruptcy, Farrell said.

Hillcrest's strategies to get more cash include selling its interest in SouthCrest for $44 million.

SouthCrest is a 50-50 joint venture between Hillcrest and Dallas- based Triad Hospitals that opened in May 1999. An earlier Moody's report said that through May 30, Hillcrest had lost $4.5 million from the venture.

In October, Hillcrest's chief financial officer, Craig McKnight, said Hillcrest had no intention of pulling out. But that has apparently changed.

"The only conversation we're having right now is with Triad," Hillcrest spokeswoman Sally Huggins said Monday.

Hillcrest managers also want to sell Children's Medical Center for $9 million and want to terminate a frozen pension plan and free up $11 million, meaning the health care company has stopped contributing to the employee pension.

Tulsa is the largest city in the United States without a public hospital. Hillcrest is a private organization but cares for most of Tulsa's indigents.

Hillcrest is seeking $20 million annually from the state Legislature for indigent care, and Moody's said managers hope funds become available in February or March after lawmakers convene.

Without state support, Hillcrest would have to stop its graduate training program, which includes affiliation agreements with the University of Oklahoma and Oklahoma State University, Huggins said.

If the programs stop, acute-care services at Tulsa Regional Medical Center would transfer to Hillcrest Medical Center, she said.