BRADENTON, Fla. - Fitch Ratings downgraded the underlying ratings of the Columbus Regional Healthcare System, Ga., to BB-plus from BBB.
The May 11 action affects $270.2 million of outstanding bonds issued in 2008 and 2010 on behalf of the hospital by the Medical Center Hospital Authority. Assured Guaranty insures the bonds.
Columbus Regional Health also has a $23.8 million unrated bank loan that is on parity with the outstanding bonds. Fitch said the outlook is stable.
"The downgrade to BB-plus reflects the unexpected further deterioration in CRH's operating performance in fiscal 2014," said analyst Emily E. Wadhwani.
The hospital booked a $46 million operating loss and thin 5% margin on earnings before interest, taxes, depreciation and amortization, which was well behind budgeted expectations, she said.
"Approximately $31 million in non-recurring items negatively impacted fiscal 2014 results, and operating losses have narrowed to $22 million through the nine-month interim period ended March 31, 2015," Wadhwani said.
Fitch said the downgrade also reflects violations of various performance covenants under bond and bank documents in fiscal 2013 and 2014. CRH is unlikely to meet its coverage covenant in fiscal 2015, and the hospital is negotiating to secure waivers.
Fiscal 2014 results included a $25 million bad debt adjustment to reflect more accurate self-pay collection rates and $4.5 million legal costs associated with a federal whistleblower lawsuit in 2013. The suit by a former administrator of the system's cancer center alleges that improper coding and billing practices resulted in overbilling government insurers.
Fitch said fiscal 2015 liquidity is likely to be impacted by a settlement in the whistleblower case.
Columbus Regional has 732 licensed beds and recorded $411.6 million of operating revenues in fiscal 2014. The system includes the 632-bed Midtown Medical Center, 100-bed Northside Medical Center, a cancer center, a foundation and a medical group, and other services.
Fitch said CRH maintains a solid market footprint, and is pursuing a strategy which should stabilize its position as the only provider in the service area for several services, including perinatal care, level III neo-intensive care, and level II trauma coverage.
Over the longer term, the hospital system is expected to develop its Northside campus, and that should alleviate some exposure to Medicaid, which was a high 20.9% of fiscal 2014 gross revenues, according to Fitch.
