Moody's Investors Service has placed Meriter Hospital's A1 rating under review for downgrade as the system struggles with 2012 operating losses due to the Meriter Health Services' health insurance plan -- Physicians Plus Insurance Corporation.

The action impacts $97 million of rated debt issued through the Wisconsin Health and Educational Facilities Authority. The review is expected to be completed within 90 days.

The hospital enjoyed good operating results in 2012 with a 4.4% operating margin. However, the system as a whole recorded an adjusted operating loss of $3.4 million and operating cash flow of $33.6 million in 2012, marking the system's fourth consecutive year of declining operating cash flow margin.

The decline was due to challenges with the system's insurance plan which has seen enrollment declines.

"Our review will focus on the specific drivers behind PPIC's enrollment declines and operating challenges," Moody's wrote. The agency attributes the challenges in part to strained relations with Aa3 rated University of Wisconsin Hospital and management's turnaround plan.

MHS also recently announced that it was in partnership discussions with different health systems.  "Our review also will focus on the nature and timeline of these potential partnerships, and the extent to which these may affect MHS's overall improvement efforts," Moody's said.

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