BRADENTON, Fla. — Moody's Investors Service dropped the general obligation bond ratings on Louisiana's St. Charles Parish Hospital District No. 1 by five notches to below investment grade citing a strained financial position and high debt load.

The downgrade to Ba1 from A2 affects $23.2 million of outstanding unlimited GO debt rated by Moody's.

The rating review also considered an additional $8.2 million in GO debt and $6.5 million in limited-tax GO debt not rated by Moody's "because it poses a strain on the financial position of the district," according to analyst James Colvin.

"The downgrade to Ba1 reflects the district's consistently strained financial operations, a very narrow cash position, and a highly leveraged debt position due to frequent borrowing and the extension of maturities," Colvin said Thursday.

St. Charles Parish Hospital is the parish's only hospital with 1,600 annual admissions, down 10% over the past four years. A majority of net patient revenue comes from Medicare, 28%, and Medicaid, 25.9%. The remaining revenue is from self-paying patients and insurance.

"Hospital financial operations have continued to struggle over the past several years," said Colvin.

For fiscal 2012, the hospital realized a negative change in net assets of $424,512. Unrestricted net assets declined to a negative $4.3 million. The decline was driven primarily by a decrease in reimbursement costs for self payments and in disproportionate share payments for low income or uninsured patients.

District officials anticipate an additional operating deficit of $500,000 in fiscal 2013, further pressuring operations, Colvin said.

"The hospital's liquidity level remains narrow with no future plans to increase it," he said.

The hospital's ending cash position was $2.1 million or a narrow 22 days of cash on hand in fiscal 2012, Moody's said. In fiscal 2013, the district's cash position deteriorated further to $1.6 million or 18 days cash on hand.

District officials expect operations to improve in fiscal 2014 due to the opening of a new cardiac catheterization lab. Future plans include opening a new medical office facility.

"Moody's notes that plans are in the early stages for the office facility and financial benefits of the new facility will not be realized for several years," said Colvin. "We believe that hospital operations will continue to remain strained for the foreseeable future."

Further deterioration in the district's liquidity level could cause negative pressure on the district's rating, he added.

St. Charles Parish Hospital is a hospital service district owned by St. Charles Parish, which has no incorporated municipalities and is located west of New Orleans. The hospital is a nonprofit 59-bed acute care facility with an on-campus medical office building for outpatient services, a community-based medical office building, and plans to add another.

Standard & Poor's assigns A ratings and a stable outlook to district's debt.

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