Constructon debt leads to lower bond rating for NW Community Hospital

Additional debt associated with a major expansion project at Northwest Community Hospital in Arlington Heights led to a cut this week in its bond rating, though it remains among the best for independent private hospitals.

Gail Finn, the hospital's chief financial officer, said the cut wasn't a surprise and won't affect the interest rate the hospital has to pay to finance the project because it remains in the top tier in its rating. The rating by Standard & Poor's was cut from AA to AA-, but that still is in the top 7 percent among the 400 stand-alone hospitals that are rated, Finn said.

Northwest Community is in the process of issuing $240 million in bonds to finance an expansion that includes a new parking deck that opened last week, three more operating rooms, an expanded emergency department and a new patient bed tower.

S&P said the hospital's overall financial profile remains solid but that the hospital has experienced flat to declining volume over the past two fiscal years. The hospital is at capacity in its operating rooms and emergency department and is experiencing disruption from construction work, the report said.

"We're at capacity," Finn confirmed, adding that's what the expansion project is addressing, with key facilities expected to be completed in 2010.

The hospital remains in the top tier in its rating because of its solid market share in a competitive service area, good balance sheet, acceptable profitability for the past two fiscal years, improved operating income for the seven months ending April 30 and its experienced management team, S&P said in its report.

"The stable outlook reflects good pro forma balance sheet measures and NCH's preservation of an overall good market position," S&P credit analyst Antionette Maxwell said in a prepared release. "We expect that NCH will continue posting positive operating results in line with its budget, along with the maintenance of its balance sheet strength."