DALLAS — Standard & Poor's assigned a negative outlook to its non-investment-grade rating of B-plus on the formerly bankrupt Gerald Champion Regional Medical Center in Alamogordo, N.M.
"The negative outlook reflects our view of the medical center's worse-than-budgeted operating loss year-to-date through Sept. 30 and the potential negative effect on debt service coverage," wrote S&P analyst Karl Probst.
While the health center's unrestricted reserves are still technically compliant with bond covenants, deterioration could lead to a covenant breach, Probst noted.
The hospital filed for Chapter 11 bankruptcy in August 2011 after 80 malpractice claims were filed over a doctor's use of back surgery procedures that were considered questionable. After settling the claims for $33 million, the hospital emerged from bankruptcy in August 2012.
Under the terms of reorganization, creditors to the hospital are being paid in full, including interest. A settlement of $7.5 million is being paid out over a 36-month period, with $5 million remaining to be paid out in equal installments during the next two years.
Debts to the medical center's trade creditors are being paid over a 24-month period, with less than a year remaining.
With $74.1 million of long-term debt, the hospital's bonds are secured by a pledge of revenues, a mortgage, and a debt service reserve fund.
Faced with declining patient volumes and Medicare and Medicaid payments after the lawsuits, the hospital laid off 39 employees in July 2012.
Owned and operated by the nonprofit Otero County Hospital Association, the medical center was the first military-civilian shared hospital facility in the United States. The Air Force contributed $7 million for equipment for the new hospital in 1998 and military patients were provided substantial discounts at the hospital for 15 years, with a guaranteed recovery of $7 million within the first seven years.
