The Montezuma County Hospital District has agreed to purchase the walk-in care clinic building from Southwest Health System as part of a financial recovery plan.
The district board approved a purchase price of not more than $425,000 for the 3,500-square-foot building at 1413 N. Mildred Road on the Southwest Memorial Hospital campus, said MCHD board secretary-treasurer Fred DeWitt.
Southwest Health will continue to operate the clinic and will pay MCHD for a lease.
The pending purchase agreement is part of a forbearance agreement with lenders because Southwest Health System violated a condition of the bond that funds a newly completed $32 million hospital expansion project.
“We agreed to buy the building to help strengthen Southwest Health’s financial position and get them back on their feet,” DeWitt said.
Southwest Health bought the building in October 2017 from Dr. Robert Heyl for $500,000, according to Montezuma County Assessor records.
The walk-in clinic on the north side of the campus replaced an off-campus clinic that was closed as part of a consolidation plan.
Other turnaround efforts, including staff layoffs and a new purchasing agreement for supplies, are working to improve the hospital’s financial health, said CEO Tony Sudduth.
“We’re looking better and are seeing an upswing in business,” he said. “July, August and September were all profitable months, so the trend is positive.”
The main bond violation was insufficient cash on hand, but officials said savings from cutbacks will begin to replenish the funds.
As part of the bonding agreement, Southwest is required to have 81 days’ worth of cash on hand, or $13.3 million, but it has only 16 days’ worth, about $2.6 million. It takes $165,000 per day to operate the hospital.
As part of the forbearance plan with banks, Southwest Health must be at 30 days cash on hand by December, 45 days by February and 60 days by next year. The 81-day cash on hand mark is expected by 2020.
A recent audit showed that since 2015, Southwest Memorial has been overstaffed for a hospital and community of it size. To reduce costs and prevent closure, Southwest Health laid off 40 full-time employees in August. The staff reduction and volunteer staff resignations are expected to save Southwest Health $5 million per year.