Moody’s changed the rating from Ba1 to Ba2 and revised the outlook from stable to negative.
“The revised outlook to negative from stable reflects GSH's difficulty operating as a standalone community hospital in an entrepreneurial physician environment with a growing pension liability and reliance on short-term government provider tax monies,” Moody’s report said.
Moody’s called the financial performance of GSH “unexpectedly poor” and “a reversal from prior year’s trajectory,” at -4.7 percent margin in fiscal year 2012 and -4.1 percent margin in the first quarter of FY 2013.
GSH’s market share also dropped, from 60 percent in 1Q FY 2011 to 57 percent in 1Q FY 2012. However, due to the discount rate’s drop from 5.65 to 4.05, the hospital’s pension liability grew from $27.5 million in FY 2011 to $52.8 million in FY 2012; its employer contributions grew from $5.5 million to $6.7 million during that time.
Moody’s also said GSH’s service area “continues to face intense entrepreneurial activity and physician alignment challenges, including the departure of the system’s two cardiac surgeons, which heavily disrupted inpatient and surgical volumes.”
However, the report said, GSH does have a strength in being the sole inpatient provider in its primary service area, and its debt burden is moderate, “with no debt plans in the near future.”