Fitch Ratings on Nov. 3 downgraded three series of bonds issued by Pennsylvania's Berks County Municipal Authority on behalf of Reading Hospital and Medical Center Project to A-plus from AA-minus.
The outlook is stable.
Affected are $160 million of Series 2012A fixed-rate bonds; $91.8 million of Series 2012B floating-rate notes; and $111.7 million of Series 2009A-3 fixed-rate bonds.
Reading Hospital also has outstanding $220 million in Series 2012C and D variable-rate revenue bonds, which are privately placed. Fitch does not rate them.
Fitch cited three years of "very weak" profitability after write-downs, driven by persistent revenue-cycle problems from its February 2013 rollout of its Epic platform.
"Management reports that the clinical side was relatively smooth, but billing [and] revenue cycle conversion suffered from an aggressive timeline and stressed resources," said Fitch.
"In particular, reserves for contractual allowances and denials were not properly estimated for 2013 and 2014, and led to significant overstatement of revenues while expenses continued to grow as initially budgeted."
Fitch based its stable outlook on the hospital's solid underlying operations, which it called sound despite dramatic financial volatility. "Core operations are supported by a solid employed physician base and a primary service area market share that has been steady at around 62% for several years," said Fitch.