A ratings agency has lowered its bond rating for Dayton-based Premier Health in part because it said the company will face operating challenges in the coming year stemming from the closure of Good Samaritan Hospital and from the eight months the health network spent out of network with UnitedHealthcare during 2017.
Moody’s Investors Service lowered its bond credit rating for Premier Health, stating the health network has lost volume and had weak operating performance in 2017 and 2018.
Premier, with $1.7 billion in 2017 revenue, operates Miami Valley Hospital, Atrium Medical Center, Upper Valley Medical Center as well as a large physician network.
Moody’s ratings measure the credit worthiness of hospitals, which use revenue bonds to help finance construction, upgrades and equipment. Moody’s on Jan. 22 stated that it gave Premier a negative outlook and downgraded its bond rating from A3 (upper medium grade) to Baa1 (medium grade).
Premier stated that with closing Good Samaritan, shutting down its insurance division and contract issues with UHC, the health network made decisions to stay strong into the future and said it significantly improved operating performance during the final quarter of 2018, which should continue in 2019.
“A key focus of Premier Health’s strategic plan has been to expand access to care across our geographic footprint, and early indications suggest that this effort should help drive long-term financial sustainability to support our mission of building healthier communities,” Mary Boosalis, president and CEO of Premier Health, said in a statement.
Premier said in a statement that the rating was “not unexpected given the circumstances of that time period locally, as well as broader industry trends that have had a negative impact across the nonprofit health care sector.”
Premier went back in-network with UnitedHealthcare at the beginning of 2018, and said it has kept almost all of its UHC customers.
Good Samaritan had about 1,600 employees at its main campus and closed in July. As part of the closure Premier had a voluntary retirement program and made job offers to all employees to move to other sites, and Premier said there were costs associated with both of those processes.
The Moody’s report also said that Premier has a strong competitor that has taken market share, which heightens Premier’s risk. The Dayton Daily News previously reported Kettering Health Network, Premier’s chief competitor, has been rapidly expanding its footprint, including new locations nearby existing Premier sites such as a Troy hospital under construction near Upper Valley Medical Center and a newly opened ER and medical center in Middletown close to Atrium Medical Center.
Typically, lower rated bonds have to pay a higher interest rate. That means this move could cost Premier more money the next time it seeks to issue bonds.