About Chelyen Davis:
Chelyen Davis is health reporter for The Free Lance-Star
Mary Washington’s bond rating reduced
Mary Washington Healthcare is not as credit-worthy as it once was, according to one of the national credit rating agencies.
Fitch Ratings has reduced Mary Washington’s bond rating one level, from A- to BBB+.
The agency listed several reasons for the July 11 downgrade. These include:
* The poor financial performance of Stafford Hospital.
* The arrival of a competitor, the Spotsylvania Regional Medical Center.
* The loss of its “sole community provider” status. Mary Washington had earned $25 million yearly in additional federal reimbursements because it was the only hospital in the region. It lost that status in January of this year.
Fitch says Mary Washington hired outside consultants to help it deal with the loss of revenue from this change in status. One action the company took, according to Fitch, was to reduce the work force by 300 people. It did this “mainly through attrition,” Fitch says.
Fitch says Stafford Hospital had “significant operating losses” of $22 million in 2009 and $12.5 million in 2010. These losses were greater than anticipated because the census there failed to meet projections, Fitch says. The losses at Stafford affected the profitability of the parent company, Mary Washington Healthcare, and reduced its cash on hand, according to Fitch.
On the positive side, Fitch says the losses are shrinking at Stafford as volumes grow there. It also says that Mary Washington continues to add services and still commands “a dominant market share” of more than 60 percent, despite the Spotsylvania hospital. The company describes Mary Washington’s rating outlook as “stable.”
Fitch’s action means that any borrowing that Mary Washington does in the future could carry higher interest rates and cost more. The company recently borrowed $30 million to pay off a loan and to fund new cancer centers at Stafford and Mary Washington Hospital.
(For more details about Fitch’s action, see the story in tomorrow’s paper. The Fitch report can be seen here.)