Fitch downgrades St. Joseph Health Services

NEW YORK – Fitch Ratings has downgraded the $17.6 million series 1999 bonds issued by the R.I. Health and Education Building Corporation, on behalf of St. Joseph Health Services of Rhode Island, to CCC from B.
The rating downgrade to CCC reflects St. Joseph’s worsened financial position since Fitch’s last review in May 2011. Fitch characterized St. Joseph’s financial profile as having “continued operating losses, extremely weak liquidity, and inadequate debt service coverage.”
St. Joseph’s recorded a loss from operations of $6 million through the July 2011 interim period, which translated into a negative 4.5 percent, according to Fitch. In addition, the ratings firm said that St. Joseph’s liquidity levels were at an all-time low ($1.9 million in unrestricted cash and investments) as of July 31, 2011, which leaves the organization with almost no financial cushion. However, Fitch said that St. Joseph’s has reported that unrestricted cash and investments have improved to $4.5 million at year-end fiscal 2011.
Since St. Joseph’s affiliation with Roger Williams Medical Center in 2010, various consolidation efforts have taken place.
St. Joseph’s management said it expects to see further consolidation of clinical services, which should realize additional cost savings for the organization. It has a short-term breakeven goal for operations, which Fitch would view as a major milestone.
According to Fitch, the management at St. Joseph’s said that the continued operating loss is primarily due to declining patient volumes, an increase in uninsured patients utilizing various health care services, and unfavorable changes in payor mix.