Standard & Poor's on Thursday lowered its underlying rating for the outstanding debt of St. Alexius Medical Center in Bismarck to BBB-plus from A-minus.
The rating change affected $25 million of tax-exempt health care revenue bonds and $11.5 million of taxable health care revenue bonds. The outlook is stable.
"The lower underlying rating reflects continued operating and excess losses in fiscal 2003 and a decline in unrestricted cash," said Standard & Poor's credit analyst Suzie Desai. "St. Alexius' future rating and outlook will depend on management's ability to turn around financial losses in the coming year and stabilize liquidity."
The rating remains in the investment-grade category due to the hospital's stable market position, low leverage, and management initiatives, which should help St. Alexius return to profitability. The bonds are secured by a mortgage on substantially all property and equipment.
The medical center has experienced a significant increase in operating losses, which swelled to $5.2 million in fiscal 2003 from $395,000 in fiscal 2002. The hospital has experienced four consecutive years of operating losses since fiscal 2000, according to Standard & Poor's.
The absolute level of unrestricted cash and investments dropped in 2003 to $36 million from $42.5 million at the end of fiscal 2002 and fell from a high of $49.4 million in fiscal 1999. The number of days' cash on hand has continued to slide, reaching 99 days in 2003 from 125 in 2002, 135 in 2001, and a high of 178 in 1999.
St. Alexius, a major tertiary provider for western North Dakota, operates a hospital with 272 staffed beds in Bismarck, two critical-access hospitals, a same-day surgery center, and several clinics. The medical center provides care to a service area of 22 counties.
