Moody's Investors Service has placed the Ba2 bond rating of
Wednesday's move follows the
The move affects $64.5 million of rated debt that the Lebanon County Health Facilities Authority issued in 2002 and 2004.
Moody's, which cited declining admissions, continued operational losses and cash-flow stagnation, expects to complete its review within 90 days. Moody's in November downgraded the bonds to Ba2 from Ba1.
A message seeking comment was left with Good Samaritan officials.
Good Samaritan, with 172 beds, has a 58% market share within its primary Lebanon County service area in eastern Pennsylvania, although patients increasingly use facilities in Hershey and Harrisburg, 13 and 27 miles away, respectively, for tertiary services.
According to Janney Capital Markets, the hospital's operating margin has fallen to a negative 7% and its operating cash-flow margin has dropped to 1.2% for the first half of 2013, both well below speculative grade medians.
The system has reported losses in eight of the last 10 years.
"The hospital faces difficult challenges to remain independent, and further deterioration could continue," Janney Capital Markets said in a commentary earlier in the week. "However, should management form some kind of affiliation or merge with a stronger competitor interested in their market share, the credit quality of the Good Samaritan hospital bonds could improve dramatically.
"Prior to making investment decisions, investors should weigh both potential outcomes."
