S&P: Phoebe Putney Memorial Hospital, GA Outlook Revised To Stable From Negative On Improved Financial Performance
"The outlook revision reflects our assessment of Phoebe's improved overall financial performance, solid balance-sheet metrics and our expectation that operating improvement will continue," said S&P Global Ratings credit analyst Margaret McNamara.
We assessed Phoebe's enterprise profile as strong, characterized by its excellent market share in the primary service area; weak market demographics, highlighted by a decreasing population base and adequate income, however, somewhat offset this. We also assessed the financial profile as strong, balanced by solid unrestricted reserves, improved-but-modest operating performance, and adequate debt service coverage (DSC) for the rating.
We think these credit factors, when combined, lead to an indicative rating level of 'a'. As our criteria indicate, the final rating can be within one notch of the indicative credit level. In our view, the 'A+' final rating on the hospital's bonds better reflects its excellent market share and our expectation that management will continue to build on the improved operations, resulting in a more favorable financial profile.
Phoebe's main campus is in Albany in Dougherty County. Its primary service area includes Dougherty, Lee, Mitchell, Sumter, Worth, and Terrell counties; these counties have a combined population of approximately 206,000.
The stable outlook reflects Phoebe's improved operating performance, solid balance-sheet metrics, and dominant market position.
A lower rating might result during the two-year outlook period from materially weaker earnings and insufficient cash flow to generate coverage exceeding 4x. A continued decline of unrestricted reserves or the issuance of additional debt could also trigger a negative outlook or lower rating. Although we do not expect any material changes in the competitive environment, a negative change in business position could cause us to lower the rating, because market position remains a key positive rating factor.
While operating performance has improved, we would look to a long-term track record with coverage consistently exceeding 4.5x before we would consider a positive rating action. Also, we would look to see improvement in balance-sheet metrics such that they are more in line with the medians for an 'AA' category hospital.