(This is an amended version of a press release issued
July 24, 2006. It contains revised information in the second
paragraph.)
Fitch Ratings has affirmed the 'A-' on approximately $91,375,000 Massachusetts Health and Educational Facilities Authority revenue bonds (South Shore Hospital) series 1999F, 1992D, and 1993E as listed below. Although South Shore Hospital (SSH) is the only entity obligated for the outstanding debt, Fitch analyzed the financial statements of South Shore Health and Educational Corporation (SSHEC), the parent and sole corporate member of SSH. The Rating Outlook is revised to Stable from Positive.
Fitch has revised its Outlook to Stable from Positive based on SSHEC's recent operating performance and future capital plans. While SSHEC did meet its budgeted operating expectations for fiscal 2005, SSHEC is budgeting a break-even operating margin for fiscal 2006 ($720,000 in operating income) due to an increased pension expense, higher salary expense, and the unfavorable impact of change in Medicare reimbursement for transfer DRGs (diagnostic related groupings). In fiscal 2005, acute discharges fell by 3.8% compared to fiscal 2004, mainly due to a shift in patient status from inpatient to observation. Total patients (admissions and observations) remained stable from fiscal 2004 to fiscal 2005. Newborn births and outpatient surgeries in fiscal 2005 all declined by 6.6%, and 3.0%, respectively, when compared to fiscal 2004. According to management, SSH's patient volume reflects similar trends throughout the service area. Management reported to Fitch that through its membership in the South Shore Physician Hospital Organization, it has assisted in the recruitment of additional physicians and expects patient volume to increase in the near term. SSHEC intends to issue approximately $43 million in additional debt to help fund future capital projects. Fitch will assess the full impact of this new financing as further information becomes available.
SSHEC's credit strengths are its strong liquidity, stable market share, and enhanced clinical affiliations. At Sept. 30, 2005 (fiscal 2005), SSHEC had a strong 199.5 days cash on hand, cushion ratio of 11.5 times (x), and cash to debt of 159.6%, which compare favorably to Fitch's 'A' medians of 177.2 days, 13.4x, and 109.8%, respectively. SSHEC is the sole provider in its service area, and management reports that SSHEC's market share has remained relatively unchanged from the 41% it reported in 2002. SSHEC maintains strong clinical affiliations with academic medical centers and Fitch believes that SSHEC will successfully recruit the needed additional physicians to its medical staff.
Ongoing credit concerns for SSHEC are its competitive marketplace and low historical operating performance. Despite SSHEC's stable market share, the hospital still operates in the very competitive Boston area market. Through the first six months of fiscal 2006, South Shore Hospital (SSH) reported an operating income of $707,000 (budget of $360,000), which is down compared to the $2.4 million for the previous year. SSHEC reported an operating margin of 1.0% and 1.1% for fiscal 2005 and 2004, respectively, both below Fitch's 'A' median of 2.5%. SSH expects to exceed its budgeted performance for fiscal 2006.
SSH is a 284-bed (excluding 80 bassinets) hospital located approximately 16 miles from downtown Boston, in South Weymouth, MA. In fiscal 2005, SSHEC's total operating revenue was $293.5 million, with SSH accounting for 99% of total revenues and 89% of total assets.
SSHEC discloses annual and quarterly financial statements through Digital Assurance Certification LLC (DAC) at www.dacbond.com.
Outstanding Debt:
-- $62,535,000 Massachusetts Health and Educational Facilities Authority revenue bonds (South Shore Hospital), series 1999F;
-- $16,325,000 Massachusetts Health and Educational Facilities Authority revenue bonds (South Shore Hospital), series 1992D (1);
-- $12,515,000 Massachusetts Health and Educational Facilities Authority revenue bonds (South Shore Hospital), series 1993E (1).
(1) Represents the underlying rating, as the series 1992D and 1993E bonds are insured by MBIA Insurance Corp., whose insurer financial strength is rated 'AAA' by Fitch Ratings.
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.
Fitch Ratings has affirmed the 'A-' on approximately $91,375,000 Massachusetts Health and Educational Facilities Authority revenue bonds (South Shore Hospital) series 1999F, 1992D, and 1993E as listed below. Although South Shore Hospital (SSH) is the only entity obligated for the outstanding debt, Fitch analyzed the financial statements of South Shore Health and Educational Corporation (SSHEC), the parent and sole corporate member of SSH. The Rating Outlook is revised to Stable from Positive.
Fitch has revised its Outlook to Stable from Positive based on SSHEC's recent operating performance and future capital plans. While SSHEC did meet its budgeted operating expectations for fiscal 2005, SSHEC is budgeting a break-even operating margin for fiscal 2006 ($720,000 in operating income) due to an increased pension expense, higher salary expense, and the unfavorable impact of change in Medicare reimbursement for transfer DRGs (diagnostic related groupings). In fiscal 2005, acute discharges fell by 3.8% compared to fiscal 2004, mainly due to a shift in patient status from inpatient to observation. Total patients (admissions and observations) remained stable from fiscal 2004 to fiscal 2005. Newborn births and outpatient surgeries in fiscal 2005 all declined by 6.6%, and 3.0%, respectively, when compared to fiscal 2004. According to management, SSH's patient volume reflects similar trends throughout the service area. Management reported to Fitch that through its membership in the South Shore Physician Hospital Organization, it has assisted in the recruitment of additional physicians and expects patient volume to increase in the near term. SSHEC intends to issue approximately $43 million in additional debt to help fund future capital projects. Fitch will assess the full impact of this new financing as further information becomes available.
SSHEC's credit strengths are its strong liquidity, stable market share, and enhanced clinical affiliations. At Sept. 30, 2005 (fiscal 2005), SSHEC had a strong 199.5 days cash on hand, cushion ratio of 11.5 times (x), and cash to debt of 159.6%, which compare favorably to Fitch's 'A' medians of 177.2 days, 13.4x, and 109.8%, respectively. SSHEC is the sole provider in its service area, and management reports that SSHEC's market share has remained relatively unchanged from the 41% it reported in 2002. SSHEC maintains strong clinical affiliations with academic medical centers and Fitch believes that SSHEC will successfully recruit the needed additional physicians to its medical staff.
Ongoing credit concerns for SSHEC are its competitive marketplace and low historical operating performance. Despite SSHEC's stable market share, the hospital still operates in the very competitive Boston area market. Through the first six months of fiscal 2006, South Shore Hospital (SSH) reported an operating income of $707,000 (budget of $360,000), which is down compared to the $2.4 million for the previous year. SSHEC reported an operating margin of 1.0% and 1.1% for fiscal 2005 and 2004, respectively, both below Fitch's 'A' median of 2.5%. SSH expects to exceed its budgeted performance for fiscal 2006.
SSH is a 284-bed (excluding 80 bassinets) hospital located approximately 16 miles from downtown Boston, in South Weymouth, MA. In fiscal 2005, SSHEC's total operating revenue was $293.5 million, with SSH accounting for 99% of total revenues and 89% of total assets.
SSHEC discloses annual and quarterly financial statements through Digital Assurance Certification LLC (DAC) at www.dacbond.com.
Outstanding Debt:
-- $62,535,000 Massachusetts Health and Educational Facilities Authority revenue bonds (South Shore Hospital), series 1999F;
-- $16,325,000 Massachusetts Health and Educational Facilities Authority revenue bonds (South Shore Hospital), series 1992D (1);
-- $12,515,000 Massachusetts Health and Educational Facilities Authority revenue bonds (South Shore Hospital), series 1993E (1).
(1) Represents the underlying rating, as the series 1992D and 1993E bonds are insured by MBIA Insurance Corp., whose insurer financial strength is rated 'AAA' by Fitch Ratings.
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.