CHICAGO — Moody's Investors Service revised its outlook on Wisconsin-based Mercy Alliance's A2 rating to negative from stable citing execution risks from the system's January merger with Rockford Health System.

The Aug. 13 action impacts $201.5 million of debt sold through the Wisconsin Health & Educational Facilities Authority.

The new system that merges Wisconsin-based Mercy with Illinois-based Rockford is known as MercyRockford Health System.

The risks cited by Moody's include "new operating challenges in the competitive Rockford marketplace, potential for management distraction and execution risk related to operational improvement initiatives at Rockford and strategic plans which involve a significant additional debt borrowing to fund a second campus in Rockford that will become a joint obligation of Mercy and Rockford."

The A2 rating factors Mercy's multi-year trend of adequate operating margins and growth in absolute liquidity which have translated into better coverage of debt. The system is challenged by competition from other providers in the Madison area and Mercy's more modest size relative to similarly rated peers.

Mercy Alliance operates a 240-bed hospital in Janesville, Wisconsin; approximately 43 physician clinics in southern Wisconsin and northern Illinois; a skilled nursing facility that operates as a sub-acute care unit of the hospital building; Mercy Walworth Hospital and Medical Center, a 25-bed hospital facility in Walworth County; and Mercy Harvard Hospital, a 25-bed acute and 45 long-term care bed hospital in Harvard, Illinois.

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