Harvard Vanguard's credit status improves
Bank eases collateral terms; $15m now available for use
Harvard Vanguard Medical Associates, the state's largest physicians practice not affiliated with a hospital, says it has been able to free up about $15 million that was set aside as collateral for a line of credit with Bank of America Corp.
The group, based in Newton, said it no longer has to keep the cash on hand to secure a $32 million line of credit with the bank. That gives it greater flexibility as it looks to invest $30 million annually in facilities and equipment over the next five years.
"I can remember the auditors telling us we're not a going concern," said Dr. Gene Lindsey, chief executive of Harvard Vanguard and its parent, Atrius Health of Newton, recalling when Harvard Vanguard split from Harvard Pilgrim Health Care, the insurance company, in 1997. "Now, we're a creditworthy entity."
In the 1990s, the physicians group treated only members of Harvard Pilgrim. It separated from Harvard Pilgrim in an effort to expand its client base to members of other insurance companies and increase its volume. But the split left the physicians group without any cash reserves, said Lindsey. So despite its size and long history, it was poorly capitalized and financially vulnerable.
When Harvard Vanguard opened its line of credit in 1998 with what was then Fleet Bank, the lender required it to set aside an equal amount of cash to provide collateral for the amount available to borrow. Consumers with poor credit often face similar restrictions - to secure a credit card, banks require them to set aside cash equal to their credit limit. As the borrower demonstrates the ability to handle credit, the requirement may be reduced or waived.
"We needed to establish our credit out there," said Bud Stacy, Harvard Vanguard's longtime vice president of finance. "Over the past several years, our financial performance has improved. A year ago, the bank reduced the amount of collateral they required us to hold, and this year they eliminated it."
In the five years ended Dec. 31, Harvard Vanguard's revenues grew a total of 31.5 percent, to about $1 billion in the final year. Over the same period, its expenses grew 28 percent, to $986 million in the final year. The differing rates of growth enabled the group to significantly increase its profits. A profit of $2.2 million in fiscal 2003 grew to $28.4 million.
Over the same period, Harvard Vanguard was able to improve its current ratio - its current assets divided by its current liabilities - from 0.83 to 1.27. That shows the group is better able to meet its near-term obligations.
Stacy said he considers the ratio good but not outstanding, and wants to improve it further.
Harvard Vanguard has 600 doctors. Atrius, which also includes Dedham Medical Associates, Granite Medical in Quincy, Southboro Medical Group, and South Shore Medical Center in Weymouth, Norwell, and Kingston, totals 800 doctors.
Atrius's former chief executive, Debra A. Geihsler, was forced out in February after clashing with medical staff. Lindsey, a longtime physician and chairman of the Harvard Vanguard board, served as interim chief executive. His role was made permanent in June.
Jeffrey Krasner can be reached at krasner@globe.com.
