Standard & Poor's Ratings Services said it lowered its rating and underlying rating to A from A-plus on King County Public Hospital District No. 1, Wash.'s limited-tax general obligation bonds, issued for Valley Medical Center.
The outlook is stable.
"The rating change reflects our view of recent declines in the district's assessed value, resulting in the district's reliance on about $1.3 million of operating revenue to support debt service on the LTGO bonds for fiscal 2013," said Standard & Poor's credit analyst Misty Newland.
The stable outlook reflects the district's weakened financial profile since S&P's last report in August 2011, at which time it revised the outlook to positive.
At that time, the district's operating performance was improving and balance sheet measures had been steady compared with the prior year. Since then, the organization has been in the process of implementing a new electronic health record (EHR) system that has added to operating costs, resulting in negative operations in the year-to-date period and the past audited year.
In addition, liquidity has declined as a result of heavier capital spending recently associated with the EHR implementation and other capital projects.
The thinner financial metrics make a higher rating unlikely within the next two years. The district concluded the EHR implementation in October 2012, which management expects will help operations moving forward; thus, the rating agency anticipates that operations will likely improve in the near future and that the financial profile will be consistent with the rating.
The district has approximately $331 million of total long-term debt outstanding: $247 million of fixed-rate LTGO bonds and $84 million of fixed-rate revenue bonds, capital leases, and notes payable.