NEW YORK - Standard & Poor's Ratings Services said it lowered its long-term rating and underlying rating (SPUR) on Ross County, Ohio's revenue bonds, issued for Adena Health System, one notch to A-minus from A. The outlook is stable.
The downgrade reflects Standard & Poor's assessment of the system's weaker operating results in the past fiscal year, soft operating results in the interim period, and balance sheet that is more consistent with the new rating. Adena operates in an economically challenged area, and it has recently encountered a number of challenges related to physician turnover combined with a weakening payor mix.
"We believe local economic challenges will likely remain, as will some of the physician and out-migration issues that have had an effect on performance. A lower rating is possible if operating results were to weaken further or if management were to not maintain, at least, the balance sheet at current levels with a cash-to-debt ratio of more than 90% and leverage in the 45%-50% range," said Standard & Poor's credit analyst Margaret McNamara. "Over the longer term, to return to a higher rating, Adena would have to demonstrate improved and sustainable operating results and maximum annual debt service coverage that is consistently above 3.3x, as well as improved balance sheet metrics."
The stable outlook reflects Standard & Poor's expectation that Adena's revenue cycle initiatives; expense management efforts; and physician recruitment, integration, and management plans should allow it to improve operating results closer to historical levels.