Standard & Poor’s earlier this month downgraded Crittenton Hospital Medical Center’s debt to A from A-plus due to economic challenges facing the hospital.
The hospital’s debt was sold through the Michigan State Hospital Finance Authority in 2002.
The rating agency based its action on Crittenton’s balance sheet, which historically is strong but now is under pressure due to the weak national economy. Its days’ cash on hand was equal to 288 days as of Sept. 30, 2008.
While operations are improving, the first nine months of fiscal 2008 produced a negative operating margin of 0.28% and maximum annual debt service coverage of 2.88 times. The hospital also operates in suburban Detroit, which is a “challenging and competitive market,” analysts wrote.
The hospital’s positive credit features include growth in utilization in fiscal 2008 and a lack of major capital needs and a stable management team.
“The stable outlook reflects Standard & Poor’s opinion that operations will strengthen based on the growth in utilization so far in fiscal 2008 and the steps that management has taken to strengthen service lines and physician relationships in the area,” wrote analyst Brian Williamson. “However, if operations return to a negative trend and the balance sheet is further impaired, an outlook change could occur.”
Crittenton Hospital is a 290-bed facility located in Rochester Hills in Oakland County.