Standard & Poor's last week lowered its rating on roughly $58 million of hospital and revenue refunding bonds issued for Nanticoke Health Services by the Delaware Health Facilities Authority to BBB-plus from A-minus, keeping a negative outlook on the debt.
Nanticoke, based in Seaford, is in danger of facing a possible rate covenant violation for fiscal 2006 if it drops below 1.1 times debt service coverage.
"It's close enough where we're nervous about that," said analyst Martin Arrick in a phone interview. He said NHS might bring in an outside consultant to assess problems and establish cost-saving initiatives.
Although NHS is in a strong service market and has a profitable operating history, unrestricted cash and investments dropped sharply to $32.1 million in 2006 from $47 million last year. Other concerns include an increase over 2005 in the percentage of the system's revenue coming from Medicaid and a drop in inpatient surgery, a lucrative service for hospitals, Arrick said.
"The organization is going through a period of reassessment," he said.
