Moody’s Investors Service last week downgraded the Ohio Valley General Hospital to Baa3 from Baa2. The outlook remains negative.

The rating change affects $34 million of outstanding debt and is due in part to operating losses, a drop in market share, and other financial challenges.

“The negative outlook reflects the risks of continuing operating losses while the hospital implements revenue strategies and our belief that unrestricted cash could decline given weak cash flow that is not adequate to cover debt service and moderate capital spending levels,” Moody’s analysts wrote in a report.

The Ohio Valley hospital, located in the Pittsburgh area, projects an operating loss of $5.7 million in fiscal 2010. It posted a $3.6 million operating loss in fiscal 2009.

Increased operating expenses and a drop in inpatient admissions account for much of the hospital’s financial challenges. Medicare provides for 54% of gross revenue, according to Moody’s.

On the positive side, Ohio Valley had 275 days’ cash on hand as of Dec. 31 and all of its outstanding debt is fixed rate. The hospital has no derivatives.

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