Baptist Memorial, Tenn., Dropped to A: S&P

BRADENTON, Fla. - Standard & Poor's lowered its long-term rating to A from AA-minus on bonds issued for Baptist Memorial Health Care Corp., Tenn., citing operating losses, weak debt service coverage, and declining reserves.

The downgrade affects $439.8 million in outstanding long-term bonds, notes, and commercial paper as of Sept. 30, 2013. The bonds were issued by the Shelby County Health, Education, and Housing Facilities Board, Tenn., and the Mississippi Hospital Equipment and Facilities Authority.

The outlook on the long-term ratings is negative, S&P said in a July 28 report.

The lower rating reflects S&P's view of the "substantial, greater-than-anticipated widening" of operating losses in 2013 and to date in 2014, weak maximum annual debt service coverage, and declining unrestricted reserves, said analyst Suzie Desai.

"Management has worked to address the operating losses during the past couple of years, but industry pressures and other external factors have dampened [Baptist Memorial's] ability to improve overall operations despite underlying improvement in certain areas," Desai said. The health care system "continues to focus on various improvement efforts during the next few years.

"However, given the trends of the past few years, a lack of evidence of traction from these efforts could increase rating pressure," Desai said.

S&P said it continues to take a favorable view of Baptist Memorial's "solid and stable market share in a fairly large service area anchored by tertiary hospitals in the Memphis area, as well as its good balance sheet with still low debt levels."

Baptist Memorial Health Care is located in the growing and demographically favorable tri-state area in western Tennessee, northern Mississippi, and eastern Arkansas, S&P said. The nonprofit health system consists of 14 medical-surgical and specialty hospitals.

The system also has home, hospice, and psychiatric care, minor medical clinics, a network of surgery, rehabilitation, and other outpatient centers, and an education system highlighted by the Baptist College of Health Sciences.

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Healthcare industry Tennessee
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