Standard & Poor's last week revised its outlook to negative from stable on bonds issued by Louisiana's Jefferson Parish Hospital Service District No. 2 issued on behalf of East Jefferson General Hospital.
S&P affirmed its BBB-minus long-term rating on $170 million of hospital revenue and refunding bonds sold issued in 2011.
"The outlook revision and rating affirmation reflects our view of [the hospital's] failure to meet previously articulated projections including anticipated patient admission increases and break-even profitability in the 2011 to 2012 time frame," said analyst Ken Rodgers.
The failure of the hospital to meet projections "reflects what we believe is a weakened business position resulting from increased competition in its primary service area from new freestanding surgical centers that have reduced patient admissions and led to some physician defections," Rodgers said.
The changes contributed to a "negative swing" in the year-over-year comparison of the change in net assets for the nine-month period ending Sept. 30, he said.
The hospital lost about $10 million in net assets compared with a $2.9 million increase for the same period in 2011.
"Also reflected in the outlook revision is the likelihood that the hospital will not meet forecasted profitability levels for fiscal 2012 due, in part, to a $6 million loss from Hurricane Isaac-related flood damage in early September 2012 that negatively affected elective admissions for approximately one week," said Rodgers.
The hospital is heavily dependent on governmental payors, and constrained reimbursement from them also has had a minor negative impact on operations, he said.
S&P said the negative outlook reflects its view that there is at least a "one-third chance" that over the next two years the rating could fall below investment-grade level as the hospital it faces an increasingly competitive and difficult business environment.
The hospital is a licensed and staffed 420-bed secondary and tertiary oriented acute-care hospital located in Metairie, which is about six miles west of New Orleans.