The BullNBear Corner

[BullNBear52]

Now I know why I left. lol And the NC bonds are backstopped by the state. Something the article doesn't point out.

Several factors led to credit-rating downgrade for Cone Health
Posted: Friday, November 15, 2013 12:30 am
By Kelly Poe [e-mail]


GREENSBORO — It’s been a tough year for Cone Health.

The health care provider spent $90 million implementing an electrical medical records software system called Epic.

It eliminated hundreds of jobs.

It had to deal with Medicare and Medicaid reimbursement at the state and national level.

Those struggles have found their way into the hospital’s bond ratings from Standard & Poor’s Ratings Services.

The credit-rating agency changed its outlook for Moses Cone Memorial Hospital to negative from stable. It also affirmed its AA rating on N.C. Medical Care Commission’s fixed-rate series for bonds that were issued.

The negative outlook is a two-year assignment while the AA rating is a long- term assessment.

Next year, if operating trends improve, the agency can restore the stable outlook, said Karl Propst, a credit analyst at S&P.

“The big factor is that operating performance has deteriorated somewhat,” Propst said.

The S&P report said fiscal 2013 was a “transitional year,” partly because Cone Health closed its merger with Alamance Regional Medical System.

Cone reported an 18.9 percent decline in net patient revenue to $808.6 million through three quarters of fiscal 2013.

Still, the S&P report said the AA rating reflects that Cone has a dominant business position, a sound balance sheet and a low debt burden.

“We put them on a negative outlook, but the AA is a very high rating for health care bonds — in fact, there are no AAA health care bonds,” Propst said. “We still view their balance sheet to be robust.”

The report also said S&P expects the hospital to steer through the period of weak operating results.

Cone officials agree.

In a statement, Jeff Jones, Cone’s executive vice president and chief financial officer, said the company is “confident” about its future.

“This action is not unexpected given the challenges we have faced here at Cone Health and the challenging environment faced by the health care industry over the past couple of years,” Jones said. “Cone Health remains financially strong despite that environment.

“While the negative outlook is disappointing, there is no cause for alarm.”

The Winston-Salem Journal contributed to this report.

Contact Kelly Poe at [phone], and follow @kelly_poe on Twitter.

http://www.news-record.com/business/article_b36a7e80-4d47-11e3-9791-0019bb30f31a.html