After placing the A3 rating for Westchester Medical Center on review for downgrade three weeks ago, Moody’s Investors Service announced this evening that it has confirmed the A3 credit rating and revised the outlook to negative because the corporation is purchasing St. Francis Hospital in Poughkeepsie, which declared bankruptcy in December.
The A3 rating, which affects $429 million in outstanding bonds, reflects the Westchester County Health Care Corp.’s “continued financial and operational stability over the last several years and the hospital’s long-standing relationship with Westchester County,” which has an Aa1, stable rating from Moody’s. The Health Care Corp. runs the medical center, which was a county hospital through 1997.
Moody’s said it assigned a negative outlook because of the “significant operational and financial risk” Westchester Medical Center is taking in acquiring a bankrupt hospital outside its immediate service area and attempting to recapture lost patient volume, boost revenue and cut large losses. The medical center will continue to face certain financial challenges due to its high Medicaid exposure and continued uncertainty regarding future state funding levels, the agency said.
Westchester Medical spokesman David Billig said last month that the Moody’s review was a “normal response” to its planned purchase of a bankrupt hospital “and thus more a reflection of the fact that the seller is in bankruptcy than a commentary on the Medical Center’s financial strength.”
Moody’s said it would reassess the rating and outlook in mid- to late 2014 as more information becomes available about the medical center’s ability to increase volume and reduce operating losses at St. Francis; its plans for a possible capital project on its main campus; and the availability and timing of potentially large payments through the state’s Medicaid waiver program.
“Given the significant challenges associated with improving performance at St. Francis Hospital, a rating upgrade is unlikely in the near term,” Moody’s said in releasing details of its evaluation. “Over the longer term, a rating upgrade would be considered if WCHCC is able to show evidence of sustainable, improved financial performance and higher levels of liquidity at both its main campus and the St. Francis Hospital.”
The federal government agreed last month to allow New York to reinvest $8 billion in federal savings generated by the state’s efforts over five years to reduce the cost of Medicaid, a health-care program for the poor and disabled. The reinvestment will go toward preserving vital health services in Brooklyn and other parts of the state, including struggling hospitals, Gov. Andrew Cuomo said in a statement at the time.
Moody’s said Westchester Medical Center’s strengths include continued stable financial performance and “historical, demonstrable financial support” from the county, which the ratings agency believes the county “would support the hospital should it encounter financial distress.” Other strengths include a growth in unrestricted cash and investments and a strong patient demand for its services.