BOND RATING DOWNGRADED
Moody's Investors Service said it downgraded Erlanger Health System's long-term unenhanced bond rating to Baa2 from Baa1, and has placed the rating under review for possible further downgrade.
Obligations that are rated Baa2 are considered medium grade and are subject to moderate credit risk, according to Nasdaq.
The downgrade affects $165 million of rated debt issued through the Chattanooga-Hamilton County Hospital Authority.
"These actions follow continued operating pressures in the first nine months of fiscal year 2013 and a still modest balance sheet profile," a statement from Moody's said.
The Baa2 rating "reflects very weak operating cash flow generation," the service reported. As a result, annualized debt-to-cash flow is "very high," and Moody's-adjusted maximum annual debt service coverage "remains weak."
"The downgrade also reflects significant distractions during the extended CEO search process," the Moody's report said. "A permanent CEO was hired on April 1, 2013, with extensive experience in solidifying financial improvement, growing market share and enhancing physician relations."
Moody's expects to complete its full review within 90 days from the May announcement, the firm said.
FISCAL YEAR 2012
• July: $1.8 million loss
• August: $2 million profit
• September: $906,000 loss
• October: $730,000 profit
• November: $726,527 profit
• December: $1.1 million loss
• January: $541,232 profit
• February: $2.5 million loss
• March: $4.9 million loss
• April: $249,000 loss
• May: $197,950 loss
Eleven months into the fiscal year, Erlanger has provided more than $58.7 million in charity care and TennCare paid claims, $6.3 million of which was provided in May.
Hutcheson Medical Center had a May operating loss of $467,408, according to financial results released at Monday's Board of Directors' Budget and Finance Committee meeting.
Year-to-date, however, the Fort Oglethorpe hospital posted a profit of $289,819, budget records show.
The loss was from additional expenses associated with the hospital's new electronic medical records system, according to a news release.
Erlanger hospital continued to tighten its losses last month, but a nearly $200,000 loss in May means hospital leaders have braced to end this fiscal year with a deficit.
In the public hospital's monthly budget and finance committee meeting Monday, reports showed that the hospital is currently $9.8 million in the red.
Hospital leaders pointed out that at this time last year, the hospital was running a $15.2 million deficit.
"Operationally, we're in much better shape," said committee Chairman Donnie Hutcherson after the meeting. "Somebody once told me you turn a battleship around real quick; you turn an aircraft carrier around very slowly. What we've got right here is an aircraft carrier. And it's going to take a longer time to turn it around."
Chief Financial Officer Britt Tabor said patient volumes were down for the month.
Both helicopter and ambulance rides -- which had seen a downturn -- saw substantial gains this month, a testimony Tabor said, to new CEO Kevin Spiegel "putting a magnifying glass" on developing relationships with EMS agencies in both Chattanooga and in the region and making offloading processes more "easy and efficient."
"It's all about relationships, and how you develop those," Tabor said.
Hutcherson said the patient volumes would likely be off in June as well, but that the final numbers for the year would not be released until after the hospital's audit later this fall.
There could be some additional state money that could offset a bad month, but it wouldn't be substantial enough to bring the hospital into the black, he said.
The budget and finance meeting followed a closed meeting with the hospital's financial review committee, during which the 2014 budget strategy was discussed.
Contact staff writer Kate Harrison at email@example.com or 423-757-6673.