June 30--PORTLAND, Maine -- Credit ratings agencies Moody's Investors Service and Standard and Poor's split on their rating of about $242 million in bonds issued this month by Eastern Maine Health Systems to support new projects and refinance old debt.
Moody's earlier this month downgraded its rating on Eastern Maine Health Systems' bond offering, putting it at the lowest investment-grade level of "Baa3," mostly because of smaller operating margins and an increase in debt for the hospital network. It also revised its outlook for the health care system to negative.
Ratings agency Standard & Poor's held Eastern Maine Health Systems' at its lowest investment-grade standard of "BBB" and held its outlook at "stable."
Suzanne Spruce, chief communications officer for Eastern Maine Health Systems, wrote in an email that the bond issuance this week "will save the system millions of dollars in the years ahead," as it continues to complete its merger with Mercy Hospital in Portland and the second phase of its $305 million expansion in Bangor.
The hospital system this week issued two series of bonds, with $58 million intended to support earlier projects, $82 million for future projects, including phase two of its Bangor expansion, and about $79 million to refinance and simplify the structure of past debts.
Spruce wrote the network of nine hospitals will work to address concerns Moody's expressed in the change of its ratings outlook and that it would not result in any noticeable changes for patients.
Moody's said it shifted its outlook to negative based on "likely challenges to improving margins, even with savings from consolidation initiatives, as well as potential unexpected liquidity constraints."
The ratings agency said it had concerns about Mercy Hospital reducing its losses in the competitive Portland market, migration to new information technology platforms and the management of upcoming capital projects on budget and without affecting the system's liquidity.
Spruce said Eastern Maine Health Systems anticipated the expenses associated with its mergers with Mercy and Maine Coast Memorial Hospital in Ellsworth. Those changes will be completed within Eastern Maine Health Systems' current fiscal year, Spruce wrote, and the system expects the merged hospitals to at least break even this year.
She added that an industry shift to focus more on preventive care is also posing challenges for it and other hospitals, where Spruce said "reimbursements for care have not kept pace."
Moody's also expressed concern about the transition of various senior managers at Eastern Maine Health Systems. Spruce said Eastern Maine Health Systems is recruiting a senior vice president/chief operating officer and a senior vice president/chief financial officer.
"In the meantime, we have outstanding interim leadership in place and those leaders will stay on for a period of time after new, permanent replacements are hired to ensure a smooth transition," Spruce wrote.
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