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Moody's affirms A1 rating for Sarasota County Public Hospital District

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Sep/28/2011

doc stockNew York, September 27, 2011 -- Moody's Investors Service has affirmed the A1 long-term ratings assigned to Sarasota County Public Hospital District's (the District) $466 million of outstanding bonds. The outlook remains stable.

SUMMARY RATING RATIONALE: The affirmation of the A1 ratings and the stable outlook reflects the District's ability to generate consistently strong operating profitability, dominant market share in its service area, growth of unrestricted cash and investments, and expansion of its regional referral network. The District faces challenges in the form of high Medicare, impending Medicaid rate reductions, and a relatively high debt burden.

Following are some of the strengths and challenges Moody notes in its latest report:

STRENGTHS

*Dominant inpatient market share in the District's primary service area (management reports 52.7% in FY 2010); the District has made volume gains in recent years with respect to its outpatient business, but it faces competition in the form of three smaller for-profit hospitals and inpatient market share has declined slightly in the past year

*Strong and consistent financial performance; FY 2010 operating income totaled $30.1 million (5.1% margin), similar to the $25.8 million (4.6% margin) reported in FY 2009.

*The District has branded itself as a regional referral center as it has made significant inroads in physician integration, expansion of its outpatient centers, and strategic initiatives designed to build upon its core services; completion of the bed tower project in 2013 is expected to increase referrals to the hospital

CHALLENGES

*High percentage of Medicare (53.7%), which is an unprofitable payer, and small managed care percentage results in limited opportunities for revenue growth based on rate increases; the recent budget passed by the Florida state legislature that significantly cut Medicaid reimbursement has the potential to impact the District's profitability, although Medicaid accounted for only 9.6% of the District's gross patient revenues in FY 2010

*Ad valorem tax revenues declined in FY 2010, a result of declining property values and the District's decision to not increase the millage rate; the taxes account for 8.1% of total operating revenues in FY 2010.

The stable outlook reflects the District's strong and stable financial performance, maintenance of liquidity, and lack of operational disruptions during the construction phase of the campus improvement plan.

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