Moody's Investors Service said it has downgraded to Baa2 from Baa1 the long-term bond rating assigned Riverview Hospital, Ind.'s $4.3 million of outstanding bonds issued by the Indiana Health Facility Financing Authority.
The rating outlook is revised to stable from negative at the lower rating level.
The rating downgrade to Baa2 from Baa1 reflects the decline in financial performance in fiscal year (FY) 2012 at the hospital and employed physician group, the continued volume declines in FY 2012 compared to the prior year, the intensifying competition from large systems consolidating around Riverview's primary service area and the hospital's small size making it vulnerable to physician departures and financial variability.
The stable rating outlook reflects Riverview's good market position in its primary service area, its status as a county owned hospital, improved absolute cash position, and good debt service coverage ratios.
The hospital has entered a number of agreements with nursing homes throughout Indiana which materially increased the operating revenue of the system and absolute income in FY 2012.
While Moody's views these agreements as risky and distracting for management, it believes this additional cash flow allows this small provider to spend on capital and implement strategies supporting the stable rating outlook at the lower rating.
