Fitch Affirms Beloit Memorial Hospital WI Bonds at 'A+'; Stable Outlook

Business Wire, Sept 3, 2004

NEW YORK -- Fitch affirms its rating on Wisconsin Health and Educational Facility Authority's approximate $2,600,000 outstanding hospital revenue bonds, series 1993 (Beloit Memorial Hospital, Inc.) at 'A '. The Rating Outlook is Stable.

The affirmation is supported by the hospital's strong balance sheet relative to debt burden, consistently solid operating margins, and dominant market share in its primary service area. At June 30, 2004, Beloit's unrestricted cash balance was $24.01 million, driving its cash-to-debt ratio of 921.7%, cushion ratio of 53.5 times (x), and 115.5 days cash on hand. Beloit's balance sheet should remain strong, as its two-year capital plan is manageable, with $4.7 million expected to be spent in 2004 and $5.7 million in 2005. There are no current plans for significant capital projects in the near term. The hospital has continued to exhibit good cash flow that has resulted in consistently solid operating margins and very strong coverage of maximum annual debt service (MADS), which has averaged 3.5% and 15.3 times (x) since fiscal 2000. In addition, the hospital maintains a dominant market position and captured approximately 75% of the total admissions in its service area, which has been stable.

Credit risks include the hospital's increasing Medicaid payor mix, concentration of admissions among the top 10 admitters, and moderately small revenue base. While Beloit's Medicaid payor mix is a manageable 11.3%, it has grown from 8.0% in 2000, and the State of Wisconsin has weak reimbursement to providers for its Medicaid program. The hospital's top 10 admitters accounted for a high 48% of its admissions in 2004, up from 42% in 2000. While revenue growth at Beloit has been good in recent years, Fitch believes profitability could be susceptible to potential instability given its moderately small revenue base.

The Stable Rating Outlook reflects Fitch's belief that Beloit Memorial Hospital will continue to perform favorably into the future. Management has indicated that Beloit's mission is to remain as an independent hospital. Fitch believes that 'A ' is generally the maximum rating for a stand-alone, community hospital.

Located approximately 100 miles northwest of Chicago, Beloit Memorial Hospital is a 143 staffed bed (256 licensed) community hospital in Beloit, WI. The hospital had approximately $83 million in total operating revenue in fiscal 2003. Beloit's quarterly disclosure to Fitch has been timely and includes a balance sheet, income statement, and utilization data but not a statement of cash flows. However, bond documents do not require quarterly disclosure to nationally recognized municipal securities repositories, which Fitch views negatively.