Moody's Investors Service said it has downgraded Robinson Memorial Hospital, Ohio's bond rating to Baa3 from Baa1, affecting $5.2 million of rated bonds issued by the county of Portage, Ohio.
Concurrently, the rating is placed under review for further downgrade.
The rating downgrade to Baa3 is based on the sharp decline in operating performance and larger than anticipated operating losses driven by volume declines and revenue contraction through five months of fiscal year (FY) 2013.
Including increased competitive pressures from larger, prominent Cleveland-based health systems and a slow economic recovery in the area leading to higher uncompensated care. RMH will not meet its debt service coverage requirement of 1.2 times under bank agreements at the end of the second quarter of FY 2013.
Management is in discussions with the banks to request a second waiver. Unrestricted liquidity levels remain adequate with 118 days cash on hand, although down due to the installation of an electronic medical record. Although planned, the decrease in liquidity occurred earlier than projected due to weak operating results. Management has identified several revenue enhancement and expense reduction initiatives to stem the operating losses by the end of FY 2013.
The rating is placed under review for further downgrade given the magnitude of the operating decline, precipitous drop in core measures during the first five months of the fiscal year and absence of evidence of stability.
The review will focus on the hospital's turnaround plans. The inability to stabilize performance during the third quarter of FY 2013 and the inability to get waivers from the banks will place material pressure on the rating.
