S&P: Floyd Memorial Hospital & Health Services, IN Outlook Revised To Positive From Negative
"We assessed Floyd's enterprise profile as adequate, characterized by a leading, but not dominant market share in a more limited service area," said S&P Global Ratings analyst Kevin Holloran. "S&P Global Ratings assessed its financial profile as adequate, with recent financial improvements when compared with prior-year losses and a constrained, but improved balance sheet." Combined, we think these credit factors lead to an indicative rating level of 'bbb-'. In our view, the final 'BBB-' rating on the hospital's bonds accurately reflects the hospital's recent losses, but also more recent turnaround efforts, which we expect will continue to gain traction, along with Floyd's stabilized balance sheet.
"The rating and outlook revision reflects our assessment of Floyd's significant operational turnaround in fiscal 2015, improved balance sheet metrics, and stable year-over-year volumes," added Mr. Holloran.
The 'BBB-' rating reflects our assessment of Floyd's strengths, including its good market share in Floyd County and its broader service area, although it does have competition from Indiana and Kentucky hospitals in the broader seven-county service area.
The positive outlook reflects our opinion that Floyd will maintain its current business position and patient volumes, sustaining its better-than-break-even financial performance from both fiscal years 2015 and 2016 year-to-date. Sustained operational improvements will also contribute to unrestricted reserve growth, bolstering Floyd's balance sheet.
We would expect to raise the rating over the outlook period with continued operational success, such that Floyd produces consistent 2% operating margins and gradually improved unrestricted reserve levels.
While unlikely, should Floyd terminate its planned merger with Baptist Health and operations return to negative performance, or an unforeseen deterioration of unrestricted reserves, we could lower the rating during the outlook period.
Floyd is a 241-licensed-bed (including 20 bassinets) facility in New Albany, approximately 10 miles west of Louisville, across the Ohio River.