Health System’s Bad News

Moody’s Investors Service last week downgraded to A3 from A2 the Metrohealth System in Ohio and revised the outlook to negative from stable.

The action affects $192 million of bonds issued through Cuyahoga County.

In late November, Moody’s placed the Cleveland-based system on watch list for potential downgrade due to a decline in financial performance through the first nine months of fiscal 2011.

The downgrade also reflects rising uncompensated care, inpatient volume declines, turnover in top management, and the deferral of capital spending “at a time when competitors in the market are spending heavily on capital,” analysts said.

The average age of a plant at the system is more than 18 years, according to Moody’s.

“The negative outlook reflects the uncertainty regarding the system’s ability to improve financial performance by reducing expenses in a flat revenue growth environment without a permanent senior leadership team in place,” Moody’s said in the report.

Metrohealth is the safety-net hospital for Cuyahoga County, the most populous and wealthiest county in Ohio. The provider derives nearly 50% of its patient revenue from Medicaid or self-pay patients.

Standard & Poor’s rates the system BBB-plus.

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Healthcare industry Ohio
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