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Ohio Treasurer makes financing available to strained hospitals

Hospitals are feeling the financial burden from the coronavirus outbreak as they forgo elective surgeries and the revenue they bring in, surge capacity and dedicate resources to incoming COVID-19 patients.

Ohio Treasurer Robert Sprague said in a statement that his office has launched a program that allows up to $900 million to be invested to stabilize hospitals’ short-term debt.

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Dayton-based Premier Health has already signed on to participate in the program, which will mean savings for participating health systems, while providing a return on the Treasury’s investment.

“We’re putting our balance sheet to work for those serving on the front lines of the COVID-19 crisis – our hospitals and their selfless, dedicated staff,” Sprague stated.

This week, the Ohio Treasurer’s office said it began purchasing eligible Variable Rate Demand Obligation of participating Ohio health care systems and other critically important institutions to alleviate debt service costs during the COVID-19 outbreak.

Variable Rate Demand Obligations are a common debt instrument used by large health care systems.

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While costs are up for hospitals, the municipal bond market is at a virtual standstill and the market for Variable Rate Demand Obligations is under significant stress and interest rates are rising sharply.

Nationally rates have jumped to their highest levels since the financial crisis in 2008 (5.2% last week). Ohio hospitals have paid rates as high as 8% over the past week.

The Treasurer’s office will submit bids for up to $100 million of these eligible debt obligations per qualifying institution at a rate of 2% for the remainder of the declared emergency.

This helps health care systems get a normalized interest rate during this time of crisis and are not unnecessarily harmed by market disruption.

“The Ohio Hospital Association appreciates the steps the Ohio Treasurer’s office is taking to assist hospitals and health systems in their response to the COVID-19 outbreak,” said Mike Abrams, Ohio Hospital Association President and CEO.

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The following Ohio health care systems have already signed on to participate in the program:

Bon Secours Mercy Health

Cleveland Clinic

Nationwide Children’s Hospital

OhioHealth

Premier Health

Summa Health

The program will be revisited on a weekly basis and could expand or contract as the state Treasury’s liquidity needs require.

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