Fitch downgrades Nebraska Methodist bonds

Citing profitability and capital issues, Fitch Ratings has downgraded more than $218 million in revenue bonds issued by three-hospital Nebraska Methodist Health System.

Fitch downgraded the bonds to "BBB+" from "A-," bumping the debt from high quality to good quality.

The downgrade "is supported by the higher-than-anticipated expense associated with bringing the new Women's Hospital on line in June of 2010, coupled with lower-than-anticipated patient volumes which has strained operating profitability through the nine-month interim period ending Sept 30, 2010," the agency said in a statement.

Fitch noted the average daily census at the new 116-bed facility is 50, compared with the projected census of 66, a condition it said reflected the recessionary environment, which has driven down the demand for maternity services.

Between the lower patient volumes and higher costs, Nebraska Methodist posted an operating loss of $3 million through the first nine months of 2010, compared to operating income of $13 million for the same period in 2009.

Although Nebraska Methodist's cash and investments have grown a robust 61 percent since the end of the 2008 fiscal year, Fitch said its current liquidity--along with a planned $30 million in additional borrowing--is in line with a "BBB" rating.

For more:
- read the Healthcare Finance News article
- read the Fitch press release