Fitch Ratings has assigned an 'A' rating to the expected issuance of $44,990,000 Mississippi Hospital Equipment and Facilities Authority's series 2009 refunding bonds issued for the benefit of Forrest County General Hospital (FCGH). Fitch also affirms the rating on the hospital's outstanding series 2007 and 2000 bond issues. The Rating Outlook is Stable.
Bond proceeds will be used to current refund the hospital's outstanding series 2007 bond issue, fund the termination payment associated with a swap issued in conjunction with the series 2007 bond issue, and pay for costs of issuance. The bonds will be issued as unenhanced fixed-rate bond issue, on parity with existing hospital debt and secured by a general obligation of the hospital under the bond documents.
The rating is supported by the FCGH's continued strong market share position, strong recovery in profitability for fiscal year 2009, and a manageable debt burden defined as maximum annual debt service as a percentage of revenues. Debt to capitalization ratios are also low compared to category medians and cash to debt ratios are strong. The primary credit concern continues to be FCGH's dependence on the revenues from Disproportionate Share Hospital (DSH) and Upper Payment Limit (UPL) programs to sustain the current profitability trends, a challenging payor mix and future capital plans including the issuance of new debt to replace the 95-bed Highland Community Hospital.
FCGH's continues to be the dominant market provider in its total service area with a 71% market share, more than twice the market share of its nearest competitor, Wesley Medical Center. FCGH has been designated as one of the four Level II trauma centers in the state-wide trauma system, with no other Level II trauma centers within its service area. Operating performance has improved dramatically in fiscal 2009. After suffering significant operating losses in fiscal 2007 followed by a solid recovery in fiscal 2008, FCGH expects to end fiscal 2009 with strong profitability ratios and excellent coverage primarily due to increases in DSH/UPL reimbursement monies, strong expense control and revenue cycle enhancements.
For the 10-month interim period ending July 31, 2009, FCGH earned $28.7 million from operations (7.5% operating margin) and $32 million in excess earnings (8.4% excess margin), which compare favorably to Fitch medians for category of 2.7% and 3.2%, respectively. Maximum annual debt service (MADS) coverage is strong at 6.2 times (x) versus the median of 3.1x. MADS as a percentage of revenues is low at 2.1% and below the category median of 3.1%. Because FCGH had made the strategic decision to avoid the issuance of debt and fund capital expenditures from operations, debt ratios compare well to Fitch's 'A' category medians, but liquidity ratios are weaker than the medians. FCGH has a 14.8x cushion ratio for the 10-month interim period which compares well to the 13.3% median for the 'A' category. In addition, the cash to debt ratio of 306.9% is well above Fitch's median of 113.4% and the debt to capitalization ratio is low at 15.6%. However, FCGH's days cash on hand of 158.5 is below the median for the category of 171.2 days.
Because of the hospital's position as a regional trauma center, FCGH attracts a wide spectrum of patients from throughout the region, and more than 60% of the hospital's patient mix is a combination of Medicaid and Medicare. FCGH's payor mix also has a high percentage of self-pay patients at 11.1% and bad debt as a percentage of revenues is at 15%, down from as high as 20% in fiscal 2007. Fitch is encouraged by the solid recovery trends evidenced in fiscal 2008 and continuing into fiscal 2009, reflecting a lessened vulnerability to changes in state reimbursement payments. But there continues to be a high correlation between FCGH's future profitability trends and expected DSH/UPL reimbursement projections. The hospital has provided conservative projections for the forecasted periods 2009 through 2014, indicating operating margins that range between 6% and 8% However, operating margins fall to essentially break-even excluding DSH/UPL payments, but FCGH has exceeded its projections over the last two years. In addition, the FCGH is planning to issue approximately $45 million by fiscal 2011 to fund construction of a new hospital in Picayune. Total construction costs are estimated at approximately $60 million with the balance of funding coming from internal funding.
The Stable Outlook reflects Fitch's expectation that FCGH will sustain its recent improvement in profitability and continue to support its future capital needs while enhancing its liquidity reserves over the near to medium term.
Forrest County General Hospital owns and operates two hospitals including Forrest General Hospital, a 512-staffed bed, acute-care hospital, with an 88-bed chemical dependency and psychiatric facility and 24-bed rehabilitation unit, located in Hattiesburg, MS and Highland Community Hospital, a 95-bed, full-service acute care medical facility located in Picayune, MS. FCGH also leases 33 beds for long-term acute care to Regency Hospital, and operates, but does not own, Walthall County Hospital in Tylertown, MS. FCGH covenants to disclose annual financial information and utilization statistics to the Nationally Recognized Municipal Securities Information Repositories (NRMSIRs), but does not post its quarterly information.
Contact: Carolyn Tain 212-908-0341 or Gary Sokolow 212-908-9186, New York.
Media Relations: Cindy Stoller, New York, Tel: 212 908 0526, Email: cindy.stoller@fitchratings.com.
Fitch Rates Forrest County General Hospital (Mississippi) Series 2009 Rfdg Bonds 'A'; Outlook Stable
Fitch Ratings has assigned an 'A' rating to the expected issuance of $44,990,000 Mississippi Hospital Equipment and Facilities Authority's series 2009 refunding bonds issued for the benefit of Forrest County General Hospital (FCGH). Fitch also affirms the rating on the hospital's outstanding series 2007 and 2000 bond issues. The Rating Outlook is Stable.
Bond proceeds will be used to current refund the hospital's outstanding series 2007 bond issue, fund the termination payment associated with a swap issued in conjunction with the series 2007 bond issue, and pay for costs of issuance. The bonds will be issued as unenhanced fixed-rate bond issue, on parity with existing hospital debt and secured by a general obligation of the hospital under the bond documents.
The rating is supported by the FCGH's continued strong market share position, strong recovery in profitability for fiscal year 2009, and a manageable debt burden defined as maximum annual debt service as a percentage of revenues. Debt to capitalization ratios are also low compared to category medians and cash to debt ratios are strong. The primary credit concern continues to be FCGH's dependence on the revenues from Disproportionate Share Hospital (DSH) and Upper Payment Limit (UPL) programs to sustain the current profitability trends, a challenging payor mix and future capital plans including the issuance of new debt to replace the 95-bed Highland Community Hospital.
FCGH's continues to be the dominant market provider in its total service area with a 71% market share, more than twice the market share of its nearest competitor, Wesley Medical Center. FCGH has been designated as one of the four Level II trauma centers in the state-wide trauma system, with no other Level II trauma centers within its service area. Operating performance has improved dramatically in fiscal 2009. After suffering significant operating losses in fiscal 2007 followed by a solid recovery in fiscal 2008, FCGH expects to end fiscal 2009 with strong profitability ratios and excellent coverage primarily due to increases in DSH/UPL reimbursement monies, strong expense control and revenue cycle enhancements.
For the 10-month interim period ending July 31, 2009, FCGH earned $28.7 million from operations (7.5% operating margin) and $32 million in excess earnings (8.4% excess margin), which compare favorably to Fitch medians for category of 2.7% and 3.2%, respectively. Maximum annual debt service (MADS) coverage is strong at 6.2 times (x) versus the median of 3.1x. MADS as a percentage of revenues is low at 2.1% and below the category median of 3.1%. Because FCGH had made the strategic decision to avoid the issuance of debt and fund capital expenditures from operations, debt ratios compare well to Fitch's 'A' category medians, but liquidity ratios are weaker than the medians. FCGH has a 14.8x cushion ratio for the 10-month interim period which compares well to the 13.3% median for the 'A' category. In addition, the cash to debt ratio of 306.9% is well above Fitch's median of 113.4% and the debt to capitalization ratio is low at 15.6%. However, FCGH's days cash on hand of 158.5 is below the median for the category of 171.2 days.
Because of the hospital's position as a regional trauma center, FCGH attracts a wide spectrum of patients from throughout the region, and more than 60% of the hospital's patient mix is a combination of Medicaid and Medicare. FCGH's payor mix also has a high percentage of self-pay patients at 11.1% and bad debt as a percentage of revenues is at 15%, down from as high as 20% in fiscal 2007. Fitch is encouraged by the solid recovery trends evidenced in fiscal 2008 and continuing into fiscal 2009, reflecting a lessened vulnerability to changes in state reimbursement payments. But there continues to be a high correlation between FCGH's future profitability trends and expected DSH/UPL reimbursement projections. The hospital has provided conservative projections for the forecasted periods 2009 through 2014, indicating operating margins that range between 6% and 8% However, operating margins fall to essentially break-even excluding DSH/UPL payments, but FCGH has exceeded its projections over the last two years. In addition, the FCGH is planning to issue approximately $45 million by fiscal 2011 to fund construction of a new hospital in Picayune. Total construction costs are estimated at approximately $60 million with the balance of funding coming from internal funding.
The Stable Outlook reflects Fitch's expectation that FCGH will sustain its recent improvement in profitability and continue to support its future capital needs while enhancing its liquidity reserves over the near to medium term.
Forrest County General Hospital owns and operates two hospitals including Forrest General Hospital, a 512-staffed bed, acute-care hospital, with an 88-bed chemical dependency and psychiatric facility and 24-bed rehabilitation unit, located in Hattiesburg, MS and Highland Community Hospital, a 95-bed, full-service acute care medical facility located in Picayune, MS. FCGH also leases 33 beds for long-term acute care to Regency Hospital, and operates, but does not own, Walthall County Hospital in Tylertown, MS. FCGH covenants to disclose annual financial information and utilization statistics to the Nationally Recognized Municipal Securities Information Repositories (NRMSIRs), but does not post its quarterly information.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 'www.fitchratings.com'. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Contacts:
Fitch Ratings, New York
Carolyn Tain, 212-908-0341
Gary
Sokolow, 212-908-9186
or
Media Relations:
Cindy Stoller,
212-908-0526
