Standard & Poor’s downgraded Methodist Hospitals Inc.’s bonds issued through the Indiana Health Facility Financing Authority to BBB-plus from A-minus because of weakening patient volume that has hurt financial performance.

The downgrade affects $65.3 million of debt.

Located in northwest Indiana, the two-hospital system experienced a steep drop in inpatient volume in 2005, which led to erosion in its market share. That same year, several members of the system’s senior management team left, including the chief executive officer. The CEO position is currently being filled on an interim basis.

Methodist has hired a consultant firm to help improve operations, and officials reported a steady improvement in operating results for fiscal 2006 and for the first nine months of fiscal 2007, which ended Sept. 30.

“Given that the current management team was hired on an interim basis, the ultimate success of the Methodist Hospitals’ turnaround plan and the sustainability of progress is a concern,” said analyst Antoinette Maxwell. “We expect Methodist to stabilize its volume, thereby preventing any further erosion to its market share position.”


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