Standard & Poor’s last week lowered its underlying rating to A from A-plus on DCH Health Care Authority’s debt and maintained a negative outlook on the credit.
The action affected $30 million of Series 2006 bonds, $59.8 million of Series 2002 bonds, and $21.8 million of Series 1998 bonds.
The rating agency said its action reflected DCH’s unaudited fiscal 2008 operating loss of $8 million, compared to $5.3 million of net operating income in fiscal 2007, as well as a history of operating with a liquidity level that is low for the rating.
DCH had 65 days’ cash-on-hand in fiscal 2008 and reported a 4.7% decline in combined inpatient and observation admissions, as well as rising bad debt expense that climbed to more than 19% of net patient revenues.
The negative outlook reflects DCH’s diminished operating performance from volume weakness, increased bad debt levels, and higher-than-budgeted supplies, as well as other expenses, said a report by Standard & Poor’s analyst Karl Propst.
Although DCH has an experienced and capable management team, the recent shift in operating performance illuminates balance-sheet metrics that are more characteristic of a lower rating, he said.
“We have taken a generally negative view of the sector due to the current economic headwinds,” Propst said.
As of Sept. 30, DCH had $137 million of outstanding long-term debt and notes payable.
DCH operates three hospital campuses with a total of 672 staffed beds. Two campuses are in Tuscaloosa County and the third is in Fayette. The health system also manages Pickens Medical Center in Carrollton, which has a seven-county service area.