SAN FRANCISCO — Oregon's Sky Lakes Medical Center received an upgrade from Fitch Ratings based on the hospital's continued balance sheet growth over the past five years.
Fitch upgraded around $53 million of revenue bonds issued by Klamath Falls Intercommunity Hospital Authority on behalf of Sky Lakes, formerly known as Merle West Medical Center.
"The rating upgrade to A-minus from BBB-plus reflects the sharp improvement in SLMC's liquidity position which provides a healthy cushion against unexpected volatility even at the higher rating," analysts said in a report released Oct. 22.
The center has maintained strong profitability and cash flows over the past five years, allowing it to grow its unrestricted cash and investment over five times to $108.6 million, as of Aug. 31, 2014.
Fitch said the strong financial results reflect management's continued success in turnaround initiatives, which began in fiscal 2009. The center's operating margin has been maintained at a "robust" level and ranged from 5% to 8.5% over the last four fiscal years, compared to the median of 2.5% for an A rating.
Fitch's primary credit concern is the center's small revenue base, which exposes it to more operating volatility, analysts said.
"The organization's sensitivity to operational challenges was evidenced in the 2008-2009 economic downturn, when total operating revenue declined 12.9% driven primarily by softening inpatient volume after opening a replacement facility," Fitch said. "However, SLMC has successfully rebounded since then, returning to profitability and rebuilding its cash reserves."
Sky Lakes Medical Center is in Klamath Falls, where it operates a 100-staffed bed general acute care community hospital and several clinics.
The center is the only acute care provider within 75 miles and has sole community provider status, which Fitch views as a credit strength.
Fitch also assigned a stable outlook and said it expects the center to sustain strong financial metrics.
