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Moody’s Drops Samaritan

Moody’s Investors Service downgraded to Ba2 from Ba1 the long-term bond rating assigned to Good Samaritan Hospital’s 64.5 million of outstanding bonds issued by the Lebanon County Health Facilities Authority. Moody’s revised its outlook to negative from stable for the hospital 30 miles east of Harrisburg, Pa.

The rating agency cited Good Samaritan’s “unexpectedly poor financial performance” during fiscal 2012, which it said was a reversal from the previous year’s trajectory, and the first quarter of 2013, with admissions and market share declining.

“The revised outlook to negative from stable reflects GSH’s difficulty operating as a standalone community hospital in an entrepreneurial physician environment with a growing pension liability and reliance on short-term government provider tax monies,” Moody’s added.

Analysts said that Good Samaritan’s struggles reflect that of a small individual community hospital in an increasingly competitive health care environment.

“Despite strong but declining market share in its Lebanon County service area, Good Samaritan faces increasing competition from nearby Hershey Medical Center (Penn State), and to a lesser degree Pinnacle Health as well as Lancaster and Reading hospitals,” Janney Capital Markets’ Alan Schankel wrote in a report.

“Although competition for patients is key, physician employment is also important, with the increasing challenge of attracting physicians contributing to $9 million in losses in FY12 for Good Samaritan,” he said.

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