CARTI Faces Bond Trouble as Side Effect of Debt

The CARTI Cancer Center in Little Rock.

A projected loss for the fiscal year that ended June 30 means CARTI won’t meet the debt service coverage ratio requirements of the $50 million bond used to build its new cancer center in west Little Rock.

The size of the loss isn’t known yet because the year-end numbers are still being audited, CARTI spokeswoman Alison Melson said in a statement to Whispers last week. But CARTI has projected that its debt service ratio would be below 1.

Provisions of the bond issue require a reserve equal to 1.2 times the debt service, and falling below that ratio requires the cancer treatment nonprofit to bring in a management consultant by Nov. 15 to examine the “fees, charges, expenses and operations of CARTI,” Melson said.

In order to be “proactive,” she said, CARTI went ahead and hired last month a health care management consulting firm, Berkeley Research Group of Emeryville, California.

Melson said that CARTI had a number of issues that contributed to the loss, including fewer patients for a short time as a result of its move to an $88 million cancer center in the fall.

The 175,000-SF four-story center, which took nearly two years to build, offers medical, surgical, interventional and radiation oncology, diagnostic radiology and hematology services. CARTI began seeing patients at the new center in November 2015.

In addition, in October CARTI had some medical equipment down as a result of plumbing issues in its old radiology department.

Making matters worse, medical equipment that was ordered was put on hold by the manufacturer, Melson said.

“We had hoped for revenue tied to that equipment, … so we had to go without,” she said. “Like many people in health care, we’re having a rough financial year.”

She said she expects the Berkeley group to spend about six months assessing CARTI and then help with putting its recommendations into place.

For its fiscal year that ended June 30, 2015, CARTI had income of $2.8 million, down from $9.8 million the previous year. Its total revenue for the fiscal year that ended in June 2015 was $504.6 million, up 7.3 percent from the previous year.