Moody’s downgrades Northwest Community Hospital’s bonds
Moody’s Investors Service has downgraded its rating on Northwest Community Healthcare’s $230.2 million in bonds from A1 to A2, but that is still considered investment grade and should not affect the interest rate paid, said Bruce Crowther, the hospital’s president and chief executive officer.
“Moody’s has downgraded the entire hospital industry,” Crowther said Thursday. “We will see more and more of this. It isn’t necessarily a function of our performance or anything we’ve done or not done. And they view stand-alone hospitals as more negative — see them as higher risk. They tend to prefer systems.”
Crowther, who has insisted the Arlington Heights nonprofit hospital is in good shape to remain independent, said all of the bonds were sold to pay for building construction.
The Moody’s report said: “The stable rating outlook reflects our belief that NCH will meet the FY 2012 budget given management’s proactive strategies to address revenue and institute financial rigor to the operations.”
This refers to the hospital’s improving its collections from insurance companies, and the recent cost cutting that included layoffs of 104 full-time equivalent positions or 3 percent of the staff. That was caused by a drop of about 10 percent in the hospital patient census compared with the budget plan for the year, Crowther said.
In the report, Moody’s said the health care system, which has one hospital in Arlington Heights as well as physicians offices and immediate care facilities throughout the Northwest suburbs and in Lake County, has many strengths.
These include a healthy balance sheet and initiatives that should restore financial strength, it said. Among points it mentioned were: “Leading market share in its primary service area that boasts favorable demographic indices. Large and loyal medical staff ...”
The report also noted that the hospital has “limited immediate cash needs.”
Crowther said additional borrowing is not planned, and the health care system is investing less in hospital buildings and more in physician’s sites and bringing physicians on board.
However, Moody’s also noted challenges, including that the competition in the Northwest suburbs and the Chicago area is significant.
It also said almost half of the hospital’s debt is at a variable interest rate, and that the recent fiscal year was the third the hospital reported an operating loss. And it noted the hospital’s debt ratio is high compared with other hospitals rated A2.
The hospital had been rated double A, which is the highest a not-for profit institution of its type can get, but was downgraded to A1 last year, said Crowther.
“If you look at ratings of stand-alone hospitals, our rating is very good,” said Crowther. “It’s not a big downgrade. They like what we’re doing and the significant progress we’ve made during this year.”