Capital Spending Strategies in an Economic Recovery
CEO, Mammoth Hospital, Mammoth Lakes, CA
We are a 17-bed critical-access hospital, and the 10-year facility plan is a $50 million expansion of the inpatient area and creating some new clinic space. We are rated BBB-plus, and we would like to be rated AA-minus. We need a couple more years of financial performance behind us before Standard & Poor's will raise our ratings. The healthcare climate, healthcare reform, all those things are going to make that challenging.
We put about 10% on the bottom line and our goal every year is between 7%–10% of margin. If we do that, we will have access to capital. We have done a real financial turnaround here in the past three years. At one point we were down to about 35 days of cash on hand. We couldn't even get a line of credit from the local banks. Today we have about 140 days cash on hand and the banks are coming to us.
Our goal is to have 180 days cash on hand, and everything over that will go toward the building project. As long as we maintain that strong financial position, we will have access to capital—not like the big guys, but we will have what we need.
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