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.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.