Kootenai Medical Center, of Coeur dAlene, says it and two dozen of its fellow public hospitals in Idaho are asking the Idaho Legislature for help in the wake of a recent state Supreme Court ruling that makes it more difficult for such hospitals to seek bonds for capital projects.


The ruling, which the Idaho Supreme Court handed down last April in a case titled City of Boise v. David Frazier, requires government entities, including public hospitals, to obtain two-thirds majority voter approval during a general election before incurring long-term debt to finance capital projects. In the past, public hospitals could have the Boise-based Idaho Health Facilities Authority issue revenue bonds to fund their projects without obtaining voter approval.


Unlike with the two big hospital networks in Spokane, which are private, nonprofit entities, KMC is a nonprofit thats owned by a public hospital district.


In addition to KMC, three other hospitals out of the five in North Idaho are publicly owned and thus come under the ruling, says Tom Legel, KMCs chief financial officer. There are 25 county or district hospitals operating in Idaho, says Steve Millard, president of Boise-based Idaho Hospital Association Inc.


Requiring hospitals to hold bond elections will delay capital projects at the least, and at worst could prevent hospitals from undertaking such projects, asserts Neil P. Moss, executive director of the Idaho Health Facilities Authority. Since the ruling, one hospitalElmore Medical Center, in Mountain Homehas held an election seeking voter approval for a planned remodeling and expansion project, he says. Voters rejected the measure last fall.


This is going to affect every (public) hospital, and definitely will affect smaller hospitals, Moss says.


Legel agrees that the ruling presents significant concerns for larger hospitals such as KMC in the long term, and poses even bigger short-term problems for smaller hospitals, which dont have as large of a cash pool to draw from for capital investments. Kootenai Hospital District, of which KMC is a part, can levy property taxes to pay for capital projects, but hasnt since 1994, KMCs Web site says.


I dont believe it would affect the care that we give, and we dont have concern that citizens of our district would turn down a bond election, but it will mean additional time and energy and, to some degree, money, he says. Were hoping a solution that benefits everybody can be reached.


Thus far, KMC hasnt felt any direct impact from the ruling, Legel says. Its paying cash for current projects, including a $5 million parking garage and a $15 million support-services building, but for larger expansion projects or equipment purchases in the future, it will seek revenue bonds, and therefore, voter approval, he says.


Last spring, KMC projected in its master campus planning effort that it would spend as much as $260 million over the next 20 years to expand and renovate its facilities.


This is an additional administrative burden for projects that usually wont even involve taxpayer dollars, and could delay some of the things wed like to do, Legel says. Its a significant change from the way the law was interpreted in the past, which brings concerns to people.


In the case that resulted in the ruling, an individual, David Frazier, sought to reverse a decision by the District Court of the Fourth Judicial District that allowed the city of Boise to seek bonds to fund an expansion of the Boise Airport without holding an election. In the past, government entities could incur debt for projects either through voter approval or a district courts judicial confirmation of the entitys ability to take on debt without gaining voter approval, Moss says. Hospitals could avoid those two options by having the Health Facilities Authority issue revenue bonds because it was created by the state government, he says.


The Supreme Court overturned the judicial confirmation obtained by the city of Boise. In its majority opinion, it said the states constitution stipulates that a bond must be approved by voters unless a capital investment is ordinary and necessary, meaning theres a need to make the expenditure within one fiscal year.


Task force


KMC is participating in a task force assembled by the Idaho Hospital Association to examine the issue. The task force recommended that the association seek a constitutional amendment to exclude hospitals from the ruling, Millard says.


The feedback were getting from our members is please fix this, he says. Its a big issue and it just got dumped in our lap; nobody expected it.


The hospital association plans to ask the Idaho Legislature to amend a section of an amendment to the constitution that voters passed in 1996, which differentiates public hospitals from other public entities to allow hospitals to do joint ventures with private entities, Millard says. The new amendment would add incurring debt to the list of actions public hospitals are allowed to take.


The ruling that was made was way too narrow, he asserts. We think we have a fairly refined and very narrow fix for our members, because voters said it made sense in 1996.


The association will be looking for sponsors to introduce the bill in the House and Senate in the next few weeks, he says.


The amendment would need a two-thirds majority vote in both bodies of the Legislature, and then would be placed on the ballot for the November 2008 general election.


The association also is considering pursuing a test case to get the Supreme Court to look at the issue again, he says. That process would likely take about two years, he says.


Also, some public hospitals are looking at becoming private nonprofit entities so they can borrow money without voter approval, Moss says.


Such a process would be expensive and time-consuming, but might be worth the effort, he says.


Contact Emily Brandler at (509) 344-1265 or via e-mail at [email protected].