Moody's Investors Service said it has downgraded Davis Health System, W.Va.'s long-term rating to B2 from Ba2 and has placed the rating under review for downgrade.
This action affects the Series 1998 fixed rate hospital revenue bonds (approximately $8.0 million outstanding) and Series 1999 fixed rate hospital revenue bonds ($5.6 million outstanding) issued through the Randolph County Commission.
The action follows a substantial drop in liquidity and continued operating losses based on management-prepared unaudited, fiscal year 2012 financial statements ending December 31, 2012 and interim results through January 2013.
Management reports the significant decline in unrestricted liquidity is largely associated to revenue cycle problems caused by the implementation of a new and upgraded electronic medical record IT system, that has led to a larger than anticipated increase in patient receivables. Management reports it has begun to address these issues and expects improvement in revenue cycle during FY 2013. DHS also reports it has received a $2 million payment for IT meaningful use payments that will be reflected in its March 2013 interim financials.
Management reports DHS met all its covenants on outstanding privately-placed debt as of December 31, 2012 and remains in compliance, however, the system is in close proximity to its days cash on hand requirement under a bank loan agreement.
Moody's expects to complete a full review within 90 days.
