The Rating Outlook has been revised to Positive from Stable.
The bonds are secured by a pledge of gross revenues.
KEY RATING DRIVERS
STRONG FINANCIAL PERFORMANCE IN COMPETITIVE MARKET: The revision in the Outlook to positive reflects SCH's continued strong financial performance and market share growth in a competitive service area. SCH's financial profile is highlighted by healthy profitability and robust debt service coverage. The hospital's unrestricted liquidity position has improved and Fitch believes that this trend should continue due to sustained strong operating cash flow and manageable capital plans over the next two to three years. Further liquidity growth may lead to positive rating pressure over the next 24 months, as additional balance sheet cushion is necessary to serve as a mitigant against potential operating volatility associated with SCH's status as a single-site hospital in a competitive market.
LEADING MARKET POSITION: The hospital's inpatient market share has grown in each of its six defined regions in southwestern
SOLID UTILIZATION GROWTH: Led by a strong relationship with its medical staff, SCH continues to see good volume growth in nearly every utilization category, which is contrary to regional trends.
EFFECTIVE MANAGEMENT PRACTICES: Implemented throughput measures, revenue cycle enhancements, cost containment initiatives, and solid employee relations has helped build and support the overall financial profile improvement.
LOW DEBT BURDEN: Maximum annual debt service (MADS) of
LIQUIDITY GROWTH: Given SCH's revenue base and location in a competitive area, additional liquidity growth will be necessary before any further upward rating movement. Fitch would expect SCH's overall financial performance to consistently exceed 'AA' category medians in order to offset risks in operating volatility.
SCH is a 328-licensed and 303-staffed-bed hospital located in
SCH, which is the primary subsidiary of the parent organization
The Positive Outlook reflects SCH's continued ability to grow its overall market presence, which has improved its operating and financial profile. SCH's enhanced market presence has been supported by various service expansions, including expansion of its existing outpatient center and the opening of a second outpatient center, both in fiscal 2013, and related recruitment of medical staff. These and other strategic initiatives have resulted in solid utilization activity, which are in contrast to regional trends and have supported market share growth.
Consistently solid operating profitability has supported continued improvement in the hospital's balance sheet. At
The hospital capital budget for fiscal 2015 is approximately
The primary service area's concentrated managed care market, which is dominated by
SCH's low debt burden, which represented 1.5% of total revenue for the 11 months ended
SCH covenants to provide annual audited financial information to bondholders and Fitch as well as quarterly information to the MSRB's EMMA system. Additionally, management was candid and timely in its responses to Fitch throughout the credit review process.
Additional information is available at 'www.fitchratings.com'
In addition to the sources of information identified in the Public Finance Rating Criteria, this action was informed by information from the underwriter.
'Nonprofit Hospitals and Health Systems Rating Criteria', dated
U.S. Nonprofit Hospitals and Health Systems Rating Criteria
Source: Fitch Ratings
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