Moodys.com
Close
Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Rating Update:

MOODY'S AFFIRMS A1 RATINGS ASSIGNED TO PARKVIEW HEALTH SYSTEM'S (IN); OUTLOOK REVISED TO NEGATIVE FROM STABLE

17 Aug 2011

ACTION AFFECTS APPROXIMATELY $578 MILLION OF RATED DEBT OUTSTANDING

Indiana Finance Authority
Health Care-Hospital
IN

Opinion

NEW YORK, Aug 17, 2011 -- Moody's Investors Service has affirmed the A1 long-term and underlying ratings assigned to Parkview Health System's bonds issued by the Indiana Finance Authority. The rating outlook has been revised to negative from stable. The rating action applies to $578 million of Parkview Health System's debt as listed at the end of this report.

RATINGS RATIONALE:

The A1 rating remains supported by Parkview's size, considerable market share across a broad service area and still healthy unrestricted cash balance. The change in the rating outlook to negative reflects the erosion of the System's financial profile, which has been the consequence of the more challenging operating environment than was anticipated when Parkview embarked on sizable capital projects now underway, as well as the potential risk to liquidity should operations remain at suppressed levels.

STRENGTHS

*Unrestricted cash and investments of $634.2 million as of FYE 2010 (December 31) equated to a still healthy 297 days, is over 90% liquid, and provided 2.6 times coverage of demand debt (2.3 times on a monthly basis)

*Substantial critical mass (over 33,000 admissions system-wide) and wide breadth of clinical services with numerous access points regionally, that has resulted in a solid primary market position (5-county area), recent growth in demand (inpatient and outpatient), and increasing acuity (1.63 Medicare Case Mix Index)

*Northeast Indiana is a stable market exhibiting modest growth; and a diversified employer base

*Management has implemented a well defined clinical service line strategy aimed at revenue enhancement and diversification

*Physical properties and plant in good condition, reflecting the relatively recent construction of the majority of System assets and the north campus which is to become the flagship hospital

CHALLENGES

*Unexpectedly modest operating profile in FY 2010 (0.9% operating margin) and revenue decline (-0.3%) largely reflective of loss of State Disproportionate Share (DSH) revenue ($19 million change from FY 2009 to FY 2010); though interim FY 2011 operations through June 30, 2011 reflect marked improvement in operating margin and operating cash-flow without the benefit of DSH revenue

*Ongoing sizable capital plans underway with the goal of shifting the delivery of some of the clinical services from Parkview's Randallia Campus to its North Hospital Campus with capital spending that is supported by the Series 2009 financing and cash resources of the System (cashflow and reserves); unrestricted liquidity could decline beyond original forecast if operating performance is not improved

*Percentage of revenue derived from Medicaid is modestly high (14.1% at FYE 2010) and growing steadily

*With no certificate of need, market remains a persistently competitive operating environment with pressures stemming from a large for-profit competitor; competition to secure physician loyalty through employment and economic arrangements is constant

DETAILED CREDIT DISCUSSION:

LEGAL SECURITY: The existing Obligated Group, which consists of Parkview Health and Parkview Hospital, represents the vast majority of the System's assets, revenues, profits and cash flow. Parkview has a pledge of gross revenues of the Obligated Group to secure its outstanding bonds as well as a cash funded Debt Service Reserve Fund for the benefit for 2009A holders. Also, Parkview has added additional debt tests and limits on permitted indebtedness. However, the documents provide the System flexibility to remove entities as Obligated Group Members without triggering a default. Provisions in the legal documents also permit the System to specify "Obligated Group Affiliates" in the future, which would not be legally obligated on the public debt. Rather, the System would have the contractual right (with some limitations) to require the Obligated Group Affiliates to upstream cash to service the System's debt.

INTEREST RATE DERIVATIVES: Various, with a total notional amount of $637.2 million as of May, 2011, including: fixed payor swaps, fixed receiver swaps, fixed spread basis swap and forward fixed payor swaps. Counterparties are Citigroup and Merrill Lynch. Parkview has posted $22.8 million of collateral as of May, 2011.

RECENT DEVELOPMENTS/RESULTS

We continue to believe that Parkview's strategic initiatives solidify its market position for the longer-term. Competition in the greater Fort Wayne area remains Parkview's greatest challenge, although the system has sound strategies to maintain and grow market share. The System draws patients and referrals from throughout northeastern Indiana and northwestern Ohio. The System identifies its primary service area as the Indiana counties of Allen, Huntington, LaGrange, Noble, and Whitley, which collectively, had an estimated population of 510,000 in 2010. The System identifies the secondary service area as six other counties in northeastern Indiana and three counties in northwestern Ohio. The population of the total service area is estimated at over 870,000 in 2010; Parkview maintains a growing 41% market share of its total market area. For Profit Community Health System, Parkview's primary competitor, owns and operates several facilities in Allen County, capturing over 46% market share. There is no other acute care, general, community hospitals in Huntington, LaGrange, Noble, or Whitley Counties. The majority of the regional population growth is occurring in the System's primary service area.

We view Parkview's strategy of closely affiliating with physicians and community hospitals throughout its broader service area and surrounding region as contributing factors to higher acuity levels as broader geographic coverage has strengthened tertiary referral sources, as well as maintenance of substantial critical mass. To that end, the System is now in the build out phase of a 320 bed hospital addition to the Parkview North campus, to shift clinical service lines from Parkview Hospital to Parkview Regional Medical Center, with the North Campus ultimately becoming the tertiary care hospital for the System. Construction is to be completed by 2012. The system's focus to shift the majority of patient care to its north campus is aimed at capturing the high growth in northern Allen County while maintaining a critical presence in downtown Fort Wayne. Though plans to 'switch' medical spaces to the north campus should keep Parkview well positioned to meet the growth in the market, it also speaks to the high level of persistent competition in the market.

The System has historically faced intense competition in its marketplace, which we believe will continue, particularly given the absence of certificate of need regulations in the state of Indiana. We continue to feel that Parkview's local competitor, Community Health System, is formidable as it has established a cohesive presence in Ft. Wayne and the greater service area and offers a very similar compliment of clinical services. Both systems are competing heavily for and increasingly employing physicians or offering other types of partnerships. Finally, movement of groups of physicians, especially specialists, among systems creates some uncertainty regarding volume trends.

After exhibiting a multi-year trend of well above average operating margins, Parkview posted a very modest operating profile in FY 2010 of just $7.3 million operating income or 0.9% margin, which equated to a 87% decline from the $56 million operating profit (6.7% margin) generated in FY 2009. Furthermore operating cash flow of $82.1 million (9.8%) was materially lower than historic levels, which averaged 16.1% over the period of FY 2006-2009, and projected operating cash flow in the System's original forecast for FY 2010 ($115.8 million or 14.7% margin). Weakening reflected general economic pressures in FY 2010 as well as the loss of State DSH payments of $19 million. Management is appealing the loss of State DSH funding for FY 2010. In addition, a State Provider Tax program is being considered, with possible implementation in Fall 2011, management estimates Parkview would be a net receiver under the program.

FY 2010 performance translated into high debt to cash flow of 6.7 times and modest Moody's adjusted maximum annual debt service coverage of 3.4 times, both measures compare unfavorably to A1 medians of 3.1 times and 4.7 times, respectively. While management projected financial performance would moderate from historic levels as construction and startup costs of the north campus were absorbed, the financial and liquidity decline has exceeded management's original expectations. Parkview's previously strong operating profile had supported the A1 rating at the inception of the project as debt was incurred, the marked departure from those levels of performance underpins the negative rating outlook at this time. We note that interim results through June 30, 2011 shows System revenue growth and $15.6 million of operating income as compared with just $3.7 million gain in the comparable period of FY 2010.

Despite planned capital contributions to ongoing projects and weakened performance unrestricted liquidity of $634.2 million as of FYE 2010 (December 31) equated to a still healthy 297 days (A1 median is199 days) but provided a modest 100% coverage of total debt outstanding (A1 median is 138%).

Sizable capital plans are underway to complete the build of Parkview's north campus. Construction is supported by the Series 2009 bond proceeds and cash resources of the System (cashflow and reserves). Liquidity could be impaired if operations are not restored to levels that are sufficient to cover the committed expenditures; should balance sheet measures weaken Parkview's credit profile could be impaired.

Outlook

The change in the rating outlook to negative reflects the erosion of the System's financial profile, which has been the consequence of the more challenging operating environment than was anticipated when Parkview embarked on sizable capital projects now underway, as well as the potential risk to liquidity should operations remain at suppressed levels.

What could change the rating--UP

Over the longer term the ability to restore historic margins and rebuild balance sheet metrics, increase volumes and strengthen all measures of leverage

What could change the rating--DOWN

Inability to restore historic levels of operating performance; weakening of balance sheet or debt measures beyond what was originally projected

KEY INDICATORS

Assumptions & Adjustments:

-Based on financial statements for Parkview Health System, Inc. and subsidiaries

-First number reflects Audit year ended December 31, 2009

-Second number reflects audit year ended December 31, 2010

-Investment returns smoothed at 6% unless otherwise noted

-Interest expense "grossed up" to include capitalized interest

*Inpatient admissions: 33,038; 33,209

*Total operating revenues: $839.2 million; $836.6 million

*Moody's-adjusted net revenue available for debt service: $165.6 million; $118.3 million

*Total debt outstanding: $614.8 million; $633.7 million

*Maximum annual debt service (MADS): $39.5 million; $39.5 million

*MADS Coverage with reported investment income: 3.3 times; 2.8 times

*Moody's-adjusted MADS Coverage with normalized investment income: 4.8 times; 3.4 times

*Debt-to-cash flow: 4.0 times; 6.7 times

*Days cash on hand: 358 days; 297 days

*Cash-to-debt: 116%; 100%

*Operating margin: 6.7%; 0.9%

*Operating cash flow margin: 14.9%; 9.8%

RATED DEBT

Series 1998A, Fixed rate, MBIA insured; A1 underlying rating

Series 2001A-C; ARS, Ambac insured; A1 underlying rating

Series 2007, Variable Rate Demand Bonds, PNC LOC; A1 underlying rating

Series 2009A, Fixed rate; A1 long-term rating

Series 2009B, Variable Rate Demand Bonds, Wells Fargo LOC; A1 underlying rating

Series 2009C, Variable Rate Demand Bonds, PNC LOC; A1 underlying rating

Series 2009D, Variable Rate Demand Bonds, Wells Fargo LOC; A1 underlying rating

Series 2010A, Private Placement Variable Rate 3 Year Note with US Bank; Not Rated

CONTACTS

Obligor: Michael Browning, Chief Financial Officer, (260) 373-8407

Financial Advisor: Michael Tym, Ponder & Co., (219) 531-2369

The last rating action was on August 18, 2009 when a A1 rating with a stable rating outlook were affirmed on all parity obligations as well as assigned, on an underlying basis, to the Series 2009B,C and D bonds

The principal methodologies used in this rating was Not-for-Profit Hospitals and Health Systems published in January 2008. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare the rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, confidential and proprietary Moody's Investors Service's information, confidential and proprietary Moody's Analytics' information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Analysts

Beth I. Wexler
Analyst
Public Finance Group
Moody's Investors Service

Rachel Cortez
Backup Analyst
Public Finance Group
Moody's Investors Service

Contacts

Journalists: (212) 553-0376
Research Clients: (212) 553-1653


Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
USA

MOODY'S AFFIRMS A1 RATINGS ASSIGNED TO PARKVIEW HEALTH SYSTEM'S (IN); OUTLOOK REVISED TO NEGATIVE FROM STABLE
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS OR MOODY’S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.

CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.

All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody’s publications.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.

Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody’s Investors Service, Inc. for ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​​​​​​
Moodys.com