The Rating Outlook is revised to Positive from Stable.
HRMC has an additional
The bonds are secured by a pledge of gross receipts, a negative mortgage lien, and a debt service reserve.
KEY RATING DRIVERS
RELATIONSHIP WITH NOVANT: The Outlook revision to positive reflects the benefits being realized from HRMC's new relationship with
LOW DEBT BURDEN: HRMC's light debt burden allows for healthy debt service coverage at its rating level despite light operating cash flow. No additional debt is planned, and HRMC's capital reinvestment in recent years has allowed for a stable average age of plant equal to 11.8 years as of fiscal 2013.
STABLE BALANCE SHEET: HRMC's liquidity levels provide for some cushion against its operating performance, and related metrics are favorable for the rating category. In addition, consistent improvement in receivables is clear, with days in A/R falling to 44.8 in fiscal 2013, from 59.4 in fiscal 2009.
MIXED SERVICE AREA CHARACTERISTICS: While HRMC's long-standing position as a sole community hospital and market share leader is a significant credit strength, the service area's overall socioeconomic profile is generally unfavorable. HRMC is exposed to a high level of government/self-pay revenues, equal to 73% of its gross revenues in 2013.
STABLE FINANCIAL PERFORMANCE: It is Fitch's expectation that HRMC will sustain its current financial profile over the near to medium term, supported by its relationship with a larger system. Upward rating pressure is likely should HRMC sustain current levels of performance over the next 12-24 months.
HRMC is a 204 licensed-bed community medical center providing primary and secondary care services. The medical center is located in
RELATIONSHIP WITH NOVANT
Following over a year of searching, HRMC has identified
Fitch views this management agreement and proposed merger positively, as it has begun to provide HRMC with strong system supports in management, strategic direction, and improved operating performance. Should the merger be executed as expected, it could provide HRMC with up to
For additional information on
PROFITABILITY SUFFICIENT FOR DEBT
Despite a light operating EBITDA of 4.3% at fiscal 2013, HRMC covered MADS by same at 1.8x in fiscal 2013. Fitch believes the management agreement executed in March with Novant has already begun producing operating benefits to HRMC, as evidenced by an improved operating EBITDA of 8.9% and coverage of 3.5x through the
Offsetting this improvement is HRMC's ongoing reliance on approximately
BALANCE SHEET STEADY
Total debt equaled
Disclosure to Fitch has been adequate with quarterly disclosure, although only audited annual disclosure is required in the bond documents. HRMC provides disclosure upon request to other third parties. Fitch notes that quarterly disclosure includes a balance sheet and income statements; however, a statement of cash flows and management discussion and analysis is not provided.
Additional information is available at 'www.fitchratings.com'
--'Nonprofit Hospitals and Health Systems Rating Criteria' (
U.S. Nonprofit Hospitals and Health Systems Rating Criteria
Emily E. Wadhwani, +1 312-368-3347
Kathleen Proux, +1 312-368-3348
Eva Thein, +1 212-908-0674
Source: Fitch Ratings
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