Immediate (April 30, 2003)

Maria McClellan / Mike Noble                                         
Fletcher Allen Public Affairs
(802) 847-2886

Fletcher Allen Files Debt Capacity Study with State Regulators

BURLINGTON, VT --  Fletcher Allen Health Care has filed a debt capacity study with the Department of Banking, Insurance, Securities and Health Care Administration (BISHCA) required as part of Fletcher Allen's Certificate of Need application for the Renaissance Project.  BISHCA required this analysis to determine if Fletcher Allen has the ability to pay for the Renaissance Project currently under construction.

The study was prepared by KaufmanHall, a Chicago area-based independent financial and capital consulting firm for health care organizations.  Fletcher Allen engaged KaufmanHall to conduct a thorough analysis of Fletcher Allen's finances and its ability to take on additional debt.  KaufmanHall also reviewed Fletcher Allen's current and projected financial performance and financial position from the viewpoint of the capital marketplace.

"The study shows that Fletcher Allen can afford the Renaissance Project and its other planned capital projects," said Therese Wareham, a partner at KaufmanHall.  "Like many other health care organizations across the country, Fletcher Allen faces significant financial challenges, especially in the current year.  But given its position as Vermont's only tertiary care center and academic medical center, it is well-positioned for long-term success."

In the executive summary of its report, KaufmanHall concluded that Fletcher Allen's financial performance in 2003 is key to the success of its financial plan.  Fletcher Allen's current goal for the 2003 fiscal year, which ends September 30, is to achieve an operating margin of approximately one percent or $4 million.  This year-end goal was revised downward after the first six months of the year.  Fletcher Allen's original budget for fiscal year '03 called for an operating margin of five percent or $27.4 million.

The executive summary also stated that Fletcher Allen needs to complete the Renaissance Project and gain the incremental volume and associated revenue in order to support its long-term capital strategy and viability.

KaufmanHall also concluded that although Fletcher Allen's credit rating is likely to be reduced from an A- to a BBB in the capital markets, it will have access to needed capital in 2004 at the lower rating.  Fletcher Allen's financial plan calls for the organization to borrow an additional $85 million in 2004. 

"This study provides a comprehensive and realistic basis for our future financial planning and an accurate assessment of the challenges we face," said Ken Fisher, interim chief financial officer of Fletcher Allen.

A copy of the entire KaufmanHall study is attached for download.