AUGUSTA — One agency has downgraded the credit rating of the MaineGeneral Medical Center’s operator this year, but the hospital says it’s turning a financial corner after implementing a new collections system.
The June downgrade came from Moody’s Investors Service, which cited a weak financial performance as reasons for the move, affecting about $280 million in state bonds issued in 2011. However, the hospital says it isn’t planning to borrow more in the near term. An expert called it “routine” and said it should have little effect.
The bond agencies also pointed to some hopeful signs at MaineGeneral Health. Chief among them was that the group shouldn’t need much capital going forward after the 2013 opening of its $312 million hospital in north Augusta and a $16 million renovation of the Thayer Center for Health in Waterville that was completed last year.
Moody’s moved MaineGeneral to a rating of Ba2 from Ba1, a drop that leaves the organization with a negative bond outlook, meaning another drop could happen in the future. A similar drop came in 2013. Just after Moody’s move in June, Fitch Ratings also gave MaineGeneral a negative outlook but didn’t downgrade it, leaving it at BBB-, which is a middling rating for the agency.
Fitch highlighted a number of negative financial measures in a news release. During a nine-month period ending in March, MaineGeneral had an operating loss of more than $13 million and cash reserves of $92 million, equaling slightly more than 74 days of cash on hand, pressing up against a 75-day requirement under the hospital’s covenant.
But Terry Brann, MaineGeneral’s chief financial officer, said many of the financial issues were the result of a collections system that was processing payments from insurers slowly. He said that has improved with the implementation of a new system, and at the end of the fiscal year on June 30, the group had about $105 million in cash reserves, equaling about 85 days of cash on hand.
As a share of revenue, MaineGeneral also had 6.2 percent debt – higher than the industry median of 3.6 percent – but Fitch said that should decline because the hospital is planning no further debt.
“We’re performing very well within our metrics, and there are some very good stories to tell about our financial picture,” Brann said. “We just need to get the revenue cycle issues behind us.”
Charles Colgan, an emeritus public policy and management professor at the University of Southern Maine’s Muskie School of Public Service, called the ratings change “kind of routine,” saying it’s “an outside indicator that somebody has noticed their financial situation,” but it should have little effect because they don’t plan to borrow more.
“There are a lot of hospitals that are probably in that category,” Colgan said. “They’ve had revenues decline, so I wouldn’t describe it as a crisis situation, by any means.”
Send questions/comments to the editors.
