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Embattled hospital project near Augusta faces new challenge, a credit downgrade

Editor’s note: This story has been updated to eliminate the former final paragraph, which contained incorrect information.

By David Pendered

The high-stakes battle to build a hospital in Georgia’s most-populated county without one faces new hurdles, just two months after the state Supreme Court gave a green light for the project in Columbia County that’s been in litigation since 2014.

AU Health System, Columbia, landing pad

The hospital planned in Columbia County by AU Health System, Inc. is to provide a helicopter landing pad, which will enable patients to be air lifted to and from the facility. Credit: augustahealth.org

The court’s June 1 ruling in a case filed against Georgia’s health regulator denied the final appeal by an affiliate of HCA, a Tennessee-based health services company with a market cap of $77.79 billion. HCA’s Augusta affiliate fought to overturn a ruling that denied it a state permit to build a hospital in Columbia County, a county with a growing population of fairly affluent residents.

The new challenges are a credit downgrade, coupled with a negative outlook, issued to the entity that won the right to build a 100-bed hospital in Columbia County – Augusta University Health System, Inc.

Moody’s Investors Service on Aug. 11 issued a downgrade on $210 million in revenue bond debt issued by AU Health System.

The credit rating was downgraded from the lower tier of investment grade debt to an upper level of non-investment grade. On Moody’s scale, the rating was lowered from Baa3 to Ba1, outlook negative.

The Columbia County Health Campus is to be built in Columbia County in Grovetown near Exit 190 off I-20. Credit: augustahealth.org

The coronavirus pandemic played a role in the downgrade, as analysts observed patient volume had dropped while expenses remained high. A positive sign for the health system exists in the form of a “seasoned management team” that will work with outside consultants to balance the budget. Analysts indicate the near term financial outlook is precarious:

  • Excluding Medicare advance payments, liquidity will remain very low and liquidity growth will be constrained over the near term until cash flow improves.”

Analysts noted in the ruling that the decision by the Georgia Supreme Court does clear the path forward for AU Health System to develop a hospital in Columbia County. However, the rating action notes that the financing plan for the planned hospital, along with maintenance of existing facilities, remains uncertain:

  • “AUHS will proceed toward its plan to construct a greenfield hospital in adjacent Columbia County although funding sources for this new facility are undetermined at this time….
  • “Funding sources for the new hospital in Columbia County, along with capital needs at the existing main facilities, will remain an uncertainty until funding plans are further developed.”

The scenario looked brighter in June, when AU Health CEO Katrina Keefer issued this statement following the Supreme Court’s ruling:

Katrina Keefer

Katrina Keefer

  • “I now look forward to taking the next step in working with you, our AU Health caregivers and our partners in Columbia County, to proceed with the design, planning and construction process….
  • “A dedicated hospital for one of Georgia’s fastest-growing and largest counties will provide immeasurable benefit to our community and especially our patients that call Columbia County home. This day would not be possible without you, and for that, I am truly grateful.”

The battle that started in 2014 involved an effort to build a hospital in the fast-growing, and affluent, Columbia County, located along Richmond County’s northwest border. Household income was estimated at above $80,000 a year, according to a 2019 Census estimate.

The situation involved one of the nation’s larger hospital systems, HCA, and its facility in Augusta, Doctors Hospital. Doctors Hospital sued to overturn the 2014 ruling from the Georgia Department of Community Health that awarded a Certificate of Need to AU Health System, which is the teaching hospital of the Medical College of Georgia and is located on the campus of Augusta University.

 

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David Pendered

David Pendered, Managing Editor, is an Atlanta journalist with more than 30 years experience reporting on the region’s urban affairs, from Atlanta City Hall to the state Capitol. Since 2008, he has written for print and digital publications, and advised on media and governmental affairs. Previously, he spent more than 26 years with The Atlanta Journal-Constitution and won awards for his coverage of schools and urban development. David graduated from North Carolina State University and was a Western Knight Center Fellow.

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