NEW YORK - Standard & Poor's Ratings Services said it changed its outlook to positive from stable and affirmed its BBB-plus long-term rating on $12.1 million series 1998B bonds and its BBB-plus underlying rating (SPUR) on $98.9 million series C and 2004D bonds, both issued by the Massachusetts Development Finance Agency for Cape Cod Healthcare Obligated Group (Cape Cod).

"The positive outlook and potential for an upgrade within two years reflect Cape Cod's increasingly strong financial profile coupled with its dominant market position as a sole community provider," said Standard & Poor's credit analyst Cynthia Keller Macdonald.

The rating reflects Cape Cod's: three-year trend of higher earnings, debt service coverage, and cash flow despite challenges in the health care industry; excellent geographic market position with a dominant market share and limited outmigration to Boston and other area providers; and good balance sheet with growing cash and investments, steadily declining debt, and no future financing plans.

A higher rating is precluded at this time by Cape Cod's Medicare dependence, soft volume and market share trends, and limited record of positive operations.

A parent organization, Cape Cod Healthcare, operates Cape Cod Hospital in Hyannis and Falmouth Hospital in Falmouth, a foundation, a medical group practice, home-health related businesses, an assisted living facility, skilled nursing facilities, a captive insurance company, and medical office buildings. A revenue pledge of the obligated group and a mortgage on the system's two hospitals secure the bonds.

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