Hospital Is No Garden Spot

Moody's Investors Service dropped its rating to Ba3 from Ba1 on Garden City Hospital's long-term debt and said it will maintain its negative outlook even at the lower rating level.

The downgrade affects $7 million of outstanding debt issued in 1998. The hospital has about $47 million of outstanding bonds that were issued in 2007 that Moody's does not rate.

GCH is about 15 miles from Detroit. It is the only hospital in an eight-mile area that includes Garden City and other suburbs. Outside that area, GCH faces major competition from a variety of providers.

The downgrade comes after several years of weak operating performance, Moody's said. The hospital has suffered from declining admissions, which have fallen 20% since fiscal 2005. GCH also had declining revenue in 2010 and a drop in liquidity, cash flow, and other balance-sheet measures, analysts said.

Aggravating the bottom line is a 68% underfunded pension plan.

"The downgrade to Ba3 from Ba1 and negative outlook reflects the multi-year trend of declining volumes and the impact on financial performance," analyst Jennifer Ewing wrote in the downgrade report. "We see GCH's competitive and economically challenged location in the Detroit metropolitan area as a key element in the rating decision."

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Healthcare industry Michigan
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