Standard & Poor's Ratings Services said it revised the outlook on its BBB-minus rating on Mifflin County Hospital Authority, Pa.'s series 2000 and 2007 revenue bonds, issued for Lewistown Hospital, to negative from stable.
At the same time, the rating service affirmed its BBB-minus rating on the debt.
The negative outlook reflects Standard & Poor's assessment of Lewistown's unexpected operational losses in fiscal 2012 with continued pressure through the fiscal 2013 three-month interim period ended Sept. 30, 2012, which led to weak coverage for the rating, coupled with decreasing liquidity compared with the previous year; liquidity, however, is still, in Standard & Poor's view, good for the rating level.
The negative outlook also reflects the rating service's assessment of Lewistown's continued market share decreases due to increasing competition and lower utilization. Standard & Poor's is also aware of Lewistown's intent to partner with a larger regional provider, which, according to management, could help alleviate and address some ongoing operational pressure. The rating service, however, understands that Lewistown has not yet signed a letter of intent and that Lewistown has not yet released the partner's name.
"We could base a lower rating on continued enterprise profile challenges, such as decreasing utilization and market share. We could also base a lower rating on continued operational losses such that coverage were to decrease below 1.5x, or if liquidity were to continue to decrease such that it is no longer commensurate with the rating," said Standard & Poor's credit analyst Margaret McNamara. "We, however, could revise the outlook to stable if consistent operational improvements were to occur over the outlook's two-year period, resulting in improved margins and maximum annual debt service coverage and the stabilization of utilization and market share."
A pledge of gross receipts of the obligated group, which consists of Lewistown Healthcare Foundation; Lewistown Hospital; and Family Health Associates of Lewistown Hospital, an employed physician group, secures the bonds. Lewistown Foundation is the hospital's sole parent.