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LePage’s Erroneous Bonds Policy Seriously Threatens Maine Hospital Finances

June 18, 2014 by

Last week, the (Lewiston) Sun Journal reported that the LePage Administration’s anti-bonding policies are forcing MaineGeneral Medical Center to pay $42 million more in interest on loans than is necessary on the construction of their new hospital in Augusta. That’s $1.4 million in avoidable interest payments annually for 30 years.

MHHEFAThe legislature created the Maine Health and Higher Education Facilities Authority (MHHEFA) to allow entities like hospitals, nursing homes, public colleges, and other eligible nonprofits access to low-interest bonds. For 25 years, nonprofits have been able to join a pool under the MHHEFA that garners them lower interest rates saving money on medical costs, elder care, tuition rates, and other community services.

For more than three years, Governor LePage has refused to authorize the sale of the nonprofit bonds asserting that voters should approve them and that, if the institutions default, the state’s credit rating will be impacted.

By law, the state is not liable for repayment of these nonprofit bonds. However, if the institutions default, the state would have a moral obligation to repay them, thus they are frequently called “moral obligation” bonds. But Robert Lenna, who conceived of the idea for MHHEFA, calls concerns about an impact on the state’s credit rating “nonsense” and points to safeguards that protect the state, including healthy reserve accounts maintained for just this purpose.

The governor’s professed deference to voters is a sham. He has twice refused to authorize bonds that the voters did approve.  And earlier this year, he proposed his own moral obligation bond for a $100 million renovation to the Windham prison through bonds issued by the Maine Governmental Facilities Authority (MGFA), without regard for voter approval. MGFA is an entity almost identical to MHHEFA, for use by the courts and other state agencies.

Hospitals in Maine today are struggling. The Maine Hospital Association (MHA) reports that an all-time high two-thirds of its 38 member hospitals are implementing layoffs and pay freezes to address financial shortfalls. Hospitals in Augusta, Ellsworth, Brunswick, Bridgton, Rumford, and Calais, have recently announced layoffs.  In March this year, the Eastern Maine Medical Center in Bangor reported a $7 million budget shortfall. And Maine’s biggest hospital, Maine Medical Center, cut 225 jobs due to a $13.4 million operating deficit in August 2013. The hospitals cite fewer patients, lower Medicaid and Medicare reimbursements, and higher charitable care costs as factors contributing to their financial woes, but they also say Maine’s failure to expand Medicaid under the Affordable Care Act has made lay-offs necessary.

Maine needs healthy hospitals and the jobs they provide our communities. We need state policies that bolster our hospitals, not ones that cost them more money and force lay-offs of hardworking Maine people. Governor LePage’s refusal to allow hospitals access to low-interest MHHEFA bonds is weakening our hospitals’ finances, undermining Maine’s economy, and will unnecessarily raise health care costs for all of us.

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