Already considered below investment grade, East Jefferson General Hospital’s bond rating was lowered even more by Moody’s Investors Service last week, and it might get worse before it gets better, the firm said in a report.
The parish-owned hospital has been unable to find a large private hospital company to take over its management and pump in new money.
The lowered bond rating would become a factor if East Jefferson tries to issue bonds to pay for new construction or technology upgrades. A lower rating generally means the institution would have to pay a higher interest rate on the bonds.
The Moody’s report, released Thursday, is the latest reminder of the weak financial situation the Metairie hospital has been in, despite its 39 percent market share on the East Bank of Jefferson Parish and its 16,000 patient admissions each year.
Moody’s gave East Jefferson a “Ba2” bond rating, which is two steps below the lowest class of bonds considered investment-grade for potential buyers. One of the reasons cited was the fact that efforts to lease the parish-owned medical center to Hospital Corp. of America collapsed last month.
Parish leaders have spent years seeking private operators for East Jefferson and its counterpart in Marrero, West Jefferson Medical Center. While the parish has been working this year to finalize a 45-year agreement to lease West Jefferson to LCMC Health, formerly Louisiana Children’s Medical Center, it couldn’t find a company willing to lease East Jefferson.
Hospital leaders hoped to sign a deal with HCA, which operates Tulane University Medical Center in New Orleans. But HCA couldn’t buy out a noncompete clause in its deal with Tulane that bars the hospital company from teaming up with competing health care systems in the New Orleans market.
East Jefferson’s rating with Moody’s also dropped because 59 percent of the hospital’s revenues depend on Medicare, which provides relatively low reimbursements. The hospital also faces heavy competition from the Ochsner system, whose Moody’s bond rating is considered relatively low-risk. And it went from having 191 days of cash on hand at the end of its 2009 fiscal year to 126 days of cash on hand at the end of the 2014 fiscal year.
Days of cash on hand indicate the number of days the hospital could remain open without bringing in any more money.
While East Jefferson has more cash on hand than other hospitals with a similar bond rating from Moody’s, its rating could suffer again if the hospital doesn’t improve in that area or stop missing projected performance levels, the rating firm’s report said.
The report said factors counting in East Jefferson’s favor include its sizable market share, its lack of plans for new debt and predetermined interest rates for the debts it has.
An East Jefferson spokesman did not return a message seeking comment Friday. The hospital has said it will not actively seek out any potential new lease partners in the short term.
Moody’s first rated East Jefferson in 2011, the same year the hospital did a $170 million bond issue. About $8 million of that has been paid off, leaving $162 million in outstanding bonds for the hospital.
East Jefferson’s first bond rating from Moody’s was “Baa2,” the firm’s second-lowest category for bonds considered investment-grade. From 2013 to Thursday, Moody’s lowered the hospital’s rating three times.