Moody's Investors Service has downgraded Crittenton Hospital Medical Center's (Crittenton) bond rating to Baa2 from Baa1 on $39.7 million of fixed rate bonds issued through the Michigan State Hospital Finance Authority.
The rating is removed from review and the outlook is stable at the lower rating level.
The downgrade to Baa2 from Baa1 reflects Crittenton's position as a stand-alone hospital in the competitive greater metro-Detroit market with a trend of unfavorable financial performance coupled with a balance sheet that has eroded over the last several years and the expected addition of new debt that leverages the hospital to a level that is not consistent with the Baa1 rating category.
Construction risk with the ongoing new tower project and underfunded pension liability (which places further pressure on the balance sheet for future cash flow demands) are also concerns.
The stable outlook reflects recent changes in the senior management team and the implementation of initiatives that Moody's believes contribute to the stable performance in interim fiscal year (FY) 2012, though still softer than historical levels.
Crittenton also benefits from its demographically favorable service area and consistent market share.