Moody's Investors Service last week downgraded to A3 from A2 its rating on Adena Health System in Ohio and revised the outlook to negative from stable.

The downgrade affects $139.6 million of bonds issued through Ross County in 2008.

Moody's said the downgrade and negative outlook reflect the system's second consecutive year of significant budget shortfalls and operating losses.

Challenges include steep volume declines, physician turnover, one-time expenses, and an elevated debt load. More than 61% of gross revenues in 2012 came from Medicare or Medicaid, Moody's said.

On the positive side, Adena enjoys a 68% inpatient market share and 81% outpatient market share in Ross County, outside Columbus, analysts said. It's the county's only acute-care provider.

Other strengths include a conservative debt portfolio, with 97% of bonds in a fixed-rate mode and no interest-rate swaps. Adena also has no large capital campaigns or plans to issue new debt, Moody's said.

Standard & Poor's lowered its rating on the system to A-minus from A in June 2012. The rating agency maintains a stable outlook on the system.

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