When voters go to the polls on Tuesday to decide whether to OK a new $754 million hospital for Wishard Health Services, Wishard’s biggest opponent will be history.
Typically, taxpayers vote on such referenda when city leaders want to raise taxes to fund a new project.
That’s not the case for Wishard, which has advanced a plan to pay for the new hospital with no tax increase. Wishard wants taxpayers to guarantee bonds it wants to sell, so it can get much lower interest rates for the project.
That plan was won over support from a dizzying list of local business, civic and political leaders. Wishard’s leaders just hope enough people know that.
“There are very large numbers of people who are good, hard-working people, who live busy lives, and they have heard only a small amount about this project. They presume that we’re asking for a great big tax increase,” said Matt Gutwein, CEO of Wishard’s parent organization, the Health and Hospital Corp. of Marion County.
Even if they don’t presume Wishard wants a tax increase, voters still might conclude that they’ll eventually be asked to cover payment on Wishard’s bonds. Cost overruns on recent public projects, such as the Central Library renovation and Lucas Oil Stadium, have soured the mood for further government spending
“We bring up these past projects to remind taxpayers about what can happen despite the best intentions," said state Sen. Scott Schneider in a statement last week. "As soon as there is a snag in any part of Wishard's finances, taxpayers are on the hook.”
That’s not really true, however, countered Gutwein. He has made more than 200 presentations in the last few months—including talks at four churches on Sunday—arguing that Wishard officials have built in such a large cushion for error, that the hospital will never have to fall back on taxpayers for help.
The hospital corporation wants to sell up to $703 million in bonds to replace its aging complex of 17 buildings at 10th Street and University Boulevard.
Selling the bonds now would take advantage of historically low interest rates, which Gutwein does not expect to last. They could save Wishard hundreds of millions of dollars, Gutwein estimates.
Wishard’s bond sales would qualify for even lower interest rates under President Obama’s Build America stimulus program. Gutwein estimates that will save $120 million.
Also, the hospital corporation has saved $150 million to apply toward the project. It is also conducting a philanthropic campaign to raise another $50 million.
“I know of no other public project in the history of our state where a public entity has been able to save $150 million as a down payment of a project,” Gutwein said.
Wishard estimates its annual debt payments for the new hospital will be at least $38 million a year for 30 years. That’s 10 times higher than it currently spend on debt payments. But Gutwein noted that the higher payments still amount to only 4.25 percent of the hospital corporation’s budget.
One key source of revenue Wishard has comes from nursing homes it owns throughout the state. Much attention has focused on these homes, which receive higher payments for Medicaid patients—the lion’s share of all nursing home residents—than those received by a typical nursing home.
The Indiana Medicaid program, using a combination of state and federal funds, pays $130 a day for its patients to stay in nursing homes. But the hospital corporation pays the state $20 extra in taxes per day in order to receive the maximum federal reimbursement of $205.
So on average, the hospital corporation’s nursing homes receive an extra $55 a day, a bonus 42 percent higher than typical nursing homes.
Congress and the Government Accountability Office spent most of this decade investigating the rules, called Upper Payment Limits, which allow the hospital corporation to do garner these higher payments. They made no changes but the scrutiny has caused some to question the prudence of relying on the rules to remain the same for the 30 years it will take Wishard to pay off its bonds.
That includes Sen. Schneider and state Rep. Phil Hinkle, as well as Secretary of Commerce Mitch Roob, who held Gutwein’s job in the 1990s. It also includes Carl Moldthan, a retired firefighter and founder of the Indianapolis Taxpayers Association.
“There’s going to be cuts in Medicare and Medicaid, you know that,” Moldthan said, who will vote no in the Wishard referendum. Moldthan is sure that at some point, local taxpayers will be asked to help pay off Wishard’s bonds.
“When is this going to stop? Somebody is going to have to learn how to say no,” said Moldthan, who has opposed various public projects since 1981.
Another key issue for Wishard will be voter turnout. Special elections have notoriously low participation. In a March 2008 special election to replace the late Rep. Julia Carson’s seat in Congress, just 13 percent of Marion County voters showed up.
If the Wishard project wins, Gutwein said his staff is ready to move immediately to launch the bond sale and start construction work on the new hospital site, which will rest between the Veteran’s Affairs hospital and the IUPUI campus, roughly on the site of the former Larue-Carter mental hospital.
If the referendum fails, Gutwein said, “the most probable outcome would be that we would be required eventually to close Wishard.”