Orange Regional Medical Center in New York's Hudson Valley may get a boost from its low investment grade rating after the completion of capital improvements reduced its debt burden.
Moody’s Investors Service affirmed the Middletown, N.Y.-based hospital at Baa3 and revised its outlook to positive from stable Monday citing expectations for operating surpluses due largely to limited borrowing needs after completing the improvements. The lion's share of the roughly $304 million of affected debt was issued through the Dormitory Authority of the State of New York, according to Moody’s.
“Moody's expects ORMC will continue to grow liquidity and deleverage steadily with modest capital plans and the assumption of no additional debt,” Moody’s analyst Jennifer Barr wrote in an Aug. 5 report. “We expect that investments at the main facilities completed over the last several years, a growing employed physician group and a strong market position will continue to support favorable volumes.”
ORMC’s bonds are secured by a pledge of gross receipts by the hospital and a mortgage pledge. A debt service reserve fund of around $18 million on Series 2017 bonds issued through DASNY may be released under certain conditions late this year, which Barr said would give the hospital flexibility for additional growth.
ORMC issued $237 million of Series 2017 bonds to advance refund Series 2008 bonds that were callable in 2018. The hospital anticipated at the time of the sale that the refunding would provide an average annual debt service savings of approximately $1.5 million.
Barr noted that competition in from hospitals that are part of larger health systems would continue to be a challenge for ORMC, which for the 2018 fiscal year generated $504 million in operating revenue and saw over 21,000 inpatient admissions. The hospital completed a new 382-bed acute care facility in 2011 that serves as a regional referral center in the Mid-Hudson Valley region of New York State.
