Rated by Moody’s Investors Services
PIKEVILLE, Ky. (Feb. 5, 2015) — Moody’s Investors Service has just reaffirmed the A3 long-term rating with stable outlook assigned to Pikeville Medical Center’s $84.1 million of outstanding 2011 fixed rate revenue bonds. This rating is based on PMC’s strong and leading market share.
“The stable outlook on the long-term rating reflects our belief that PMC will continue to grow as an organization and generate improved operating and operating cash flow margins to support the outstanding debt load,” Moody’s Investors Services reported.
These ratings come at a time when other nonprofit organizations’ bond ratings are being significantly downgraded. According to a recent article, Reuters reported that “the outlook for nonprofit healthcare remains dour for 2015, as hospital operating margins continue to face pressure from rising costs and weaker reimbursement.”
“The three major credit ratings agencies gave the healthcare and hospital sector a negative outlook [for 2015] citing anticipated downgrades, declining operating cash flows and ongoing uncertainties surrounding the implementation of the Affordable Care Act,” the article states.
The same article points out that Moody’s Investors Service anticipated another 12 to 18 months of “weak performance” and reports that Fitch Ratings expects “more uncertainty” in the future because “Republicans with Congressional control vow to repeal or defund parts of the Affordable Care Act.” Fitch Ratings reportedly said repealing or defunding parts of the Affordable Care Act would “hamper the sector’s ability to adapt and plan.”
The Reuters article further notes that “Standard & Poor’s forecasted more downgrades than upgrades among not-for-profit healthcare providers for a third consecutive year, as operating margins are pinched by rising costs.”
In the article, Martin Arrick, services analyst with Standard & Poor’s Ratings, said, “The negative pressures facing most providers are widespread. Many providers will not be able to adapt.”
A Feb. 18, 2013, article in “Nonprofit Quarterly” stated that Moody’s Investors Service downgraded a record $20 billion in nonprofit hospital debt in 2012, “reflecting a ‘negative outlook’ from Moody’s on nonprofit hospitals for the past five years.
Moody’s Investors Service stated that Pikeville Medical Center’s long-standing CEO has built a capable executive team; any potential effect of his eventual retirement is unknown.
Moody’s Investor Service identified the following strengths for Pikeville Medical Center in its report:
- Strong market position as the largest, full service hospital in Pike County.
- New affiliation with Mayo Clinic has assisted with volume growth.
- Increasing volume trends due to physician recruitments and additional services such as Level II Trauma; admission grew five percent in FY 2014 over FY 2013, well ahead of national trends that show no growth.