February 18, 2018
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Moody’s affirms EMHS bond rating; downgrades outlook

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BREWER,  Maine — Moody’s Investors Service has affirmed the Baa1 rating for Eastern Maine Healthcare Systems, but also revised its outlook for the system from stable to negative.

The Baa1 long-term rating is for the $143.9 million series 2013 bonds issued by the Maine Health and Higher Educational Facilities Authority for the EMHS Obligated Group and is funding the modernization project underway at Eastern Maine Medical Center.

Moody’s cited EMHS strengths, such as market share, a manageable debt, and its efforts to become more integrated from a governance and management perspective. The report specifically mentioned EMHS’ consolidation of cash management, transition to one investment policy, and migration to a single obligated group, according to an EMHS press release.

Moody’s downgrade of the system’s outlook from from stable to negative was related to Maine’s high percentage of Medicaid patients, which is at 19 percent of the gross revenue; recent cuts in outpatient rates; and the system’s ability to reverse
the negative trend given volume softness and strategic investments, according to the statement.

Derrick Hollings, senior vice president and chief financial officer of EMHS, said in a press statement that Moody’s report provides a balanced view in light of last month’s Standard & Poor’s rating affirmation and positive outlook.

“Performance is down as compared to the same period last year,” Hollings said. “Regardless, EMHS remains fundamentally sound and our forecasts for operating income in fiscal year 2014 will come very close to meeting expectations.”

M. Michelle Hood, FACHE, president and CEO of EMHS, said she was pleased
that Moody’s affirmed EMHS’s rating and was not surprised the outlook
was revised.

“Nationally, the trend is that not-for-profit healthcare is endeared with a negative outlook from rating agencies. Much of that can be attributed to the enormous pressure of healthcare’s changing landscape, coupled with reimbursement pressures,” Hood said in a press statement.

While EMHS had a slow start to its fiscal year that affected Moody’s outlook, Hood said the report also indicated a number of strengths, including the organization’s low debt burden and integration initiatives.

“Both are strong indicators of the successful track record the system has developed through the years and we will continue to build on those and other strengths,” Hood said.

EMHS covers approximately 70 percent of Maine’s land mass and serves more than 40
percent of the state’s residents. The system’s services includes eight hospitals, physician practices, long-term care facilities, home health and hospice, and ground and air emergency transport services.