The Rating Outlook is Stable.
MMC has an additional
Debt payments are secured by a pledge of the gross revenues of the obligated group and a mortgage lien.
KEY RATING DRIVERS
IMPROVED PROFITABILITY WITH GROWTH: The affirmation at 'BB+' reflects improved cash flow in fiscal 2013 (
LESS RELIANCE ON PROVIDER FEE: MMC reported
LIQUIDITY REMAINS LIGHT: As of
MANAGEABLE FUTURE CAPITAL NEEDS: MMC's five-year capital budget (2014-2018) totals
SUSTAINED OPERATING RESULTS: Fitch expects MMC to realize the full benefits of its cost control initiatives and expansion project to achieve break-even profitability (excluding provider fee benefit) in 2014. Additionally, Fitch expects this level of cash flow to begin to rebuild its balance sheet as future capital needs are manageable.
STEADIER CORE OPERATIONS
Following the opening of its 3-story expansion, MMC was able to stabilize its operating margin at 2.6% in fiscal 2013, despite an increase in depreciation and other operating expenses. Additionally, MMC is demonstrating reduced reliance on the net benefit from the provider fee program, which equaled
Significant work on lean operations coupled with good clinical volume growth supported better profitability in fiscal 2013, and should support sustained cash flow going forward. MMC's inpatient volumes increased 3% in 2013, while attention to operating efficiency reduced inpatient length of stay to 4.4 days from 4.8 days in 2012. Without significant reductions in force, MMC held its personnel costs largely flat in 2013 from prior year, against a 3% increase in total revenues. Fitch also notes that MMC's strong market position as the only acute care provider in its service area should help support sustained performance going forward.
BALANCE SHEET STRESS
MMC has light liquidity, with metrics reflective of the below-investment-grade rating. At
MADS is calculated at
Fitch notes that sustained cash flow in excess of expected capital demands over the next three to five years should allow for balance sheet preservation at a minimum. In addition, the recent state extension of the provider fee program for another three years (through
MMC provides quarterly and annual disclosure via the Municipal Securities Rulemaking Board's EMMA System. Annual disclosure is provided within 120 days of fiscal year end; quarterly disclosure is provided within 45 days of the first three quarters and 60 days for the last quarter.
Additional information is available at 'www.fitchratings.com'
--'U.S. Nonprofit Hospitals and Health Systems Rating Criteria (
U.S. Nonprofit Hospitals and Health Systems Rating Criteria
Source: Fitch Ratings
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