Standard & Poor's Ratings Services said it has revised its outlook to positive from stable and affirmed its BB-minus rating on the $32.5 million series D bonds issued by the Massachusetts Development Finance Agency for Milton Hospital, Mass., now known as Beth Israel Deaconess Hospital - Milton.
At the same time, Standard & Poor's withdrew its rating on Beth Israel Deaconess Hospital - Milton's series C bonds, which the hospital redeemed Sept. 4.
On Jan. 1, Milton became an affiliate of Beth Israel Deaconess Hospital, (BIDMC) which is part of CareGroup (A-minus), a system of academic medical center and specialty hospitals in and around Boston. Milton has had a clinical affiliation with BIDMC since 2003; however, under the new affiliation agreement BIDMC will assume board and management control of Milton while, at the same time, agreeing to provide certain tangible services, support, and transfers.
"The positive outlook reflects our opinion that Milton will likely continue to benefit from its relationship with BIDMC, resulting in the improved financial performance that is necessary for a higher rating," said Standard & Poor's credit analyst Cynthia Keller. "We believe a higher rating is possible as early as next year," said Keller.
BIDMC did not assume responsibility for Milton's series D bonds, which Standard & Poor's will continue to rate based on Milton's financial and enterprise profiles alone.
Credit factors supporting the rating affirmation and positive outlook include our assessment of Milton's: improved earnings year to date in fiscal year 2012 on the strength of increasing volumes and BIDMC's assumption of a portion of Milton's physician losses; expected benefits from Milton's affiliation with BIDMC; adequate balance sheet for the rating category; and repayment of the short-term line of credit using an intercompany loan.
A higher rating is precluded by Milton's: competitive service area; and uncertainty around the magnitude of benefits Milton will gain from its affiliation with BIDMC.
It is unlikely Standard & Poor's would lower the rating during the two-year outlook period due to benefits already realized by Milton, which have resulted in improved interim financial performance and volumes.
