Ohio Community Hospital Junked

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CHICAGO — Standard & Poor's stripped Ohio-based Alliance Community Hospital of its investment grade rating based on revised stand-alone, acute-care hospital criteria.

The rating lowered the hospital's rating to BB-plus from BBB-minus and assigned a stable outlook Nov. 20. The hospital's bonds were sold through conduit issuer Alliance, Ohio.

Under the revised criteria, analysts said they assessed ACH's enterprise profile as adequate, characterized by weak economic fundamentals in a small service area with decreasing business volume. Standard & Poor's also assessed its financial profile as adequate, characterized by modest improvement in overall finances although its operating performance remains slim.

The rating agency also considers the hospital's debt structure as aggressive with contingent liabilities such as variable-rate and direct-purchase debt exceeding unrestricted reserves. ACH's limited revenue base with patient revenue below $125 million also contributes to the rating decision, analysts said.

"We could revise the outlook to positive or raise the rating over the longer term if ACH were to expand its service area with a commensurate growth in market share and patient volume, combined with a sustainable improvement in operating performance, cash flow, and balance sheet metrics," said Standard & Poor's analyst Margaret McNamara. "We could lower the rating further over the longer term if ACH were to report continued volume decreases or if operating results were to weaken, generating lower debt service coverage, or if the balance sheet were to deteriorate measurably."

The hospital's bonds are secured by a gross revenue pledge and a mortgage.

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Healthcare industry Ohio
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