NEW YORK - Moody's Investors Service said it has downgraded Chilton Memorial Hospital, N.J.'s (Chilton) bond rating to Baa2 from Baa1 on $39.2 million of outstanding bonds issued by the New Jersey Health Care Facilities Financing Authority. The outlook remains stable at the lower rating level.

The downgrade to Baa2 from Baa1 reflects Chilton's pronounced and unexpected downturn in financial performance in fiscal year (FY) 2011 and decline in historically stronger debt metrics.

The downturn is driven primarily by sizable volume declines in outpatient surgeries.

In addition, significant proposed changes in the already competitive service area, with a number of competing hospitals announcing potential mergers with larger for-profit systems, could challenge future volume metrics and operating performance for this small-sized stand-alone provider.

The stable outlook at the lower rating level reflects Chilton's location in a demographically favorable service area, improved financial performance in the first quarter of FY 2012, the hospital's low debt position and its growth in unrestricted cash and investments.

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