Moody's Investors Service said it has upgraded to Baa2 from Baa3 the bond rating assigned to Mercy Memorial Hospital Corporation Obligated Group's $44.7 million of outstanding Series 2006 Hospital Revenue and Refunding Bonds (fixed rate) issued by the county of Monroe, Mich., Hospital Finance Authority.
The rating outlook is revised to stable at the higher rating level.
The rating upgrade is attributable to three years of higher operating cash flow performance (2010-2012) with operating cash flow margins above 9%, growth in liquidity with cash on hand over 170 days, and strengthened debt metrics that are favorable to Baa2 medians.
MMHC also benefits from a dominant market position as the this sole acute care provider in Monroe County, although its smaller size creates greater vulnerability to unforeseen events such as the departure of key admitting physicians.
Operating performance tempered in the first six months of FY 2013 (7.6% operating cash flow margin) with additional costs associated with the implementation of electronic health records and consulting fees, but service line enhancements and continued cost control measures are expected to return the organization to operating profitability in FY 2014. The Michigan economy remains a credit challenge.
