New Hampshire's Dartmouth-Hitchcock Obligated Group received a one notch downgrade from one rating agency while another placed it on watch with negative implications.
Fitch Ratings Friday downgraded more than $130 million of revenue bonds issued the healthcare operator to A from A-plus, citing weak liquidity at the healthcare system operator.
The Fitch action impacts $57.5 million in 2009 revenue bonds and $75 million of 2010 revenue bonds issued by the New Hampshire Health & Education Facilities Authority.
S&P Global Ratings on Friday placed its A rating for the group on CreditWatch with negative implications.
Dartmouth-Hitchcock Medical Center in Lebanon is New Hampshire's only academic medical center, Level 1 trauma center and National Cancer Institute designated comprehensive cancer center.
Fitch analyst Margaret Johnson said Dartmouth-Hitchcock's financial profile has deteriorated since the system was last reviewed in February 2015. Johnson noted that the latest calculations show Dartmouth-Hitchcock with only 112 days cash on hand.
"Expectations for continued improved profitability were not met and liquidity has declined," said Johnson.
Dartmouth-Hitchcock has $535.6 million of total debt outstanding with $391 million comprised of unrated direct bank loans, according to Johnson. The group's unaudited fiscal 2016 report showed a $12 million loss from operations and a $22 million reversal in operating performance from the year-ago period. It had total revenue of $1.6 billion in fiscal 2015.
Fitch noted that it plans to have an on-site meeting with the Dartmouth Hitchcock senior management team in the fall to discuss operating results and the organization's turnaround plans. Johnson said Pricewaterhouse Coopers is slated to complete audit work soon and should be able to verify the unaudited year-end results at the meeting.
S&P analyst Jennifer Soule said the credit watch negative placement stemmed in part from the recent unexpected departure of Dartmouth-Hitchcock's chief financial officer and challenges implementing a new billing system. S&P is planning to meet with Dartmouth-Hitchcock management in the next three months to review recovery efforts.
It downgraded the group from A-plus in March.
"It's important to note that for an organization dedicated to value not volume and to delivering the care patients want and need when well informed, we will never be about maximizing profits," Dr. James N. Weinstein, CEO and President of Dartmouth-Hitchcock, said in a statement in response to the rating actions. "Our accelerated performance improvement efforts are focused on regaining our [A-plus rating] with a positive outlook, while preserving quality as job one."
