As Regional Health prepares to enter the market with a $25 million bond sale, Moody’s Investors Service affirmed its underlying A1 rating and stable outlook on the health system’s $171 million of outstanding debt.

Regional Health is the largest hospital provider in a large geographical area that includes Rapid City, where the system has a 417-bed acute care facility. The system enjoys a 90% market share.

Regional Health’s outstanding bonds are secured by the unrestricted receivables of the obligated group as well as a mortgage on some hospital properties. The South Dakota Health and Education Facilities Authority issued the bonds.

Regional Health acquired several additional facilities last year, including a regional medical clinic and a surgery center that had been its primary competitor for outpatient procedures. As a result, the system has increased its number of doctors to 89 in 2007 from 49 in 2005.

Despite its growth, the system has struggled with declining inpatient volume, which dropped 15% from 2003 to 2006, though volume increased by 1% in 2007.

Moody’s analysts warned that Regional Heath’s recent acquisitions and future plans “come at both an immediate and long-term cost,” and that it remains to be seen whether future revenues will be able to offset the increase. The planned $25 million bond sale would increase the system’s total debt by 17%.

Regional Health has considerable liquidity and has reported growing operating income margins and operating cash flow since 2006.


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