NEW YORK--(BUSINESS WIRE)-- Fitch Ratings revises the Rating Watch status to Evolving from Positive on the following bond issue for Saints Medical Center (Saints):
--$51 million Massachusetts Health and Educational Facilities Authority revenue bonds, series 1993A.
Fitch placed Saints Medical Center's 'BB+' rating on Rating Watch Positive in May 2009 due to a pending affiliation agreement with Covenant Health System (CHS; revenue bonds rated 'A' by Fitch). The affiliation plan included an expectation that Saints' series 1993A bonds would be refunded by Covenant Health System by the end of 2009. The affiliation has been delayed due to potential technical violations of federal Stark laws by Saints. To resolve these potential violations, Saints could be liable for a payment of up to $14.5 million. A payment of this magnitude would dramatically affect Saints' financial position since the organization only holds about $11.2 million of unrestricted cash and investments as of Dec. 31, 2009. However, Saints self-reported the violation to CMS, and CMS has determined that there is no evidence of fraud or abuse. Saints management has indicated that it is in active discussions with CMS to reach an appropriate outcome.
Fitch's revision of the Rating Watch to Evolving from Positive reflects the potential that CHS will not finalize the affiliation should the payment obligation be too onerous. In that scenario, a downgrade of Saints' rating would be likely. CHS and Saints' agreement to continue the affiliation process is extended periodically by a vote of each organization. The next vote to extend the process of affiliation is for June 30, 2010. The potential for an upgrade remains if the affiliation is completed and Saints' bonds are refunded by CHS.
Fitch plans to meet with Saints' management within the next few months and, as additional information becomes available, Fitch will take rating action at the appropriate time.
Saints Medical Center operates a 163-bed acute care hospital in Lowell, MA, located about 30 miles northwest of Boston. In fiscal 2009, total operating revenue was about $134 million.
Applicable criteria available on Fitch's web site at www.fitchratings.com:
--'Revenue-Supported Rating Criteria', dated Dec. 29, 2009;
--'Nonprofit Hospitals and health Systems Rating Criteria', dated Dec. 29, 2009.
Additional information is available at www.fitchratings.com.
Fitch Ratings, New York
Gary Sokolow, +1-212-908-9186
Michael Burger, +1-212-908-0555
Cindy Stoller, +1-212-908-0526 (Media Relations)
KEYWORDS: United States North America Massachusetts New York
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