UPDATED: Elmhurst Memorial Healthcare's Financial Health in Question as its Rating is Downgraded Again
Fitch Ratings cites EMHC's "weak operating performance," lagging patient volume and various other problems.
UPDATED: Jan. 30, 11:45 a.m.:
Elmhurst Memorial Hospital has released an official statement in response to the information published this week:
While early fiscal Year 2013 volumes were lower than anticipated (July in particular), inpatient and outpatient volumes have picked up significantly in recent months, and the health system continues to see growth in spite of the fact that volumes throughout the market are flat or declining.
“We will continue to manage through what is a very challenging healthcare environment,” said James Doyle, executive vice president and chief financial officer for Elmhurst Memorial Healthcare.
The financial rating for Elmhurst Memorial Healthcare was again downgraded by Fitch Ratings from BBB+ to BBB, according to a Reuters article dated Jan. 29.
EMHC is holding nearly $500 million in debt, secured by a pledge of gross revenue.
The article states that the downgrade "reflects EMH's continued weak operating performance and debt service coverage levels compared to Fitch's expectations outlined in the February 2011 surveillance review."
In July 2012, Fitch downgraded EMHC from A- to BBB+.
The A-, or stable rating, was awarded in February 2011. In October of that year, EMHC announced plans to merge with Northwestern Memorial Healthcare, but that venture was abandoned in June 2012.
EMHC is currently in merger talks with Edward Hospital and Health Services. Fitch will assess any financial impact of that merger, should it be completed.
Generally speaking, the news for EMHC's near-term financial health is not good, according to Fitch. Also contributing to the downgrade is EMH's weak cash-on-hand position and negative future outlook.
"Liquidity is not expected to improve, as EMH is constructing a $21 million cancer center, which will mostly be funded from cash flow," according to Fitch.
Additionally, the hospital has not seen the volume of patients that had been expected, according to Fitch.
"Patient volumes continue to lag expectations since the move to the new facility, reflecting overall softness in the service area."
The article also cites high expenses, although EMH has been working to reduce staffing and expenses, and a highly competitive market, with Good Samaritan Hospital (rated AA), Alexian Brothers (rated A-), Westlake and Hinsdale hospitals nearby.
Fitch expects EMH to improve its financial outlook and "stablize operations."
For the full report, click here.
Earlier this month, Moody's Investors Service revised the hospital's outlook from stable to negative.
"The negative outlook reflects EMHC's downturn in operating margins, from an adjusted operating cash flow margin of 7.4% in FY 2012 to 4.3% through five months FY 2013 (after EMHC had shown considerable improvement in the second half of FY 2012). While the decline in performance in interim FY 2013 is due in part to an increase in non-cash pension expense, core operating challenges surfaced such as inpatient volume declines (6.4% decrease in five months FY 2013, compared to the same period FY 2012). We are particularly sensitive to the weak performance in interim FY 2013 given EMHC's high debt load and debt/swap structure."