Bangkok--9 Jan--Standard & Poor's
Standard & Poor's Ratings Services revised the outlook to positive from stable on the Washington Health Care Facilities Authority's $85 million series 2005 A&B hospital revenue bond rating and underlying rating (SPUR). Standard & Poor's also affirmed its 'BBB' rating and SPUR on the debt, which was issued for Overlake Hospital Association (Overlake). The rating reflects improving operating margins and a strong market share position in a wealthy service area with a favorable payor mix.
"Overlake's market position has contributed to positive operating margins over the past five years, and the association is poised to further improve operations with its new Group Health relationship," said Standard & Poor's credit analyst Keith Dickinson. "Moreover, Overlake's leverage has been improving, and liquidity as measured by days' cash has risen significantly in the last fiscal year." Offsetting factors include high leverage associated with the sizable issuance in fiscal 2005 and heightened competition in the primary service area.
Overlake's solid 29% market position, exclusive of the new Group Health relationship that could add up to 5%, has resulted in good commercial contracting over the recent past, leading to steady revenue growth. Operating revenues increased 13.7% to $323.4 million in fiscal 2008 from $284.4 million in fiscal 2007. The operating margin improved to 3.4% from 1.9% at 2007. For the five-month interim period, the operating margin was a strong 7.5%. Overlake had 48.8% in commercial payors and just 4.6% in Medicaid in fiscal 2008 based on gross patient revenues, a favorable mix for reimbursement.
Utilization, which had leveled off due to capacity issues, is now on the upswing due to the opening of the new patient tower and the new Group Health contract. Admissions totaled 17,043 in fiscal 2008, up from 16,294 in fiscal 2007, and continue to increase as a result of inpatient volume from Group Health. Similarly, patient days increased to 58,172 from 56,141 for the same periods. While ER visits declined in 2008 to 50,827 from 51,827 in 2007, they were offset by an increase in urgent-care visits to 18,317 from 14,526 for the same period.
On an absolute basis, Overlake improved its unrestricted cash and investments to $145.9 million, or 182 days, in fiscal 2008 versus $134.6 million, or 187 days, in fiscal 2007. As a result of the equity market decline of 2008, however, Overlake's unrestricted cash and investments decreased to $125.9 million, or 135 days, through the interim period. Moreover, the expense base has grown to provide services under the Group Health contract. Debt leverage is high at 55.2% at fiscal 2008, but is down from 61.3% at fiscal 2006. Overlake anticipates no further debt issuances in the next three to five years. Cash to debt had improved to 66.8% for fiscal 2008, but fell to 59.2% as of the interim period with the November equity decline.
Located in Bellevue, an affluent suburb of Seattle, Overlake has benefited from an attractive primary service area with wealth and income levels well above state and national averages, as well as a growing population.
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Media Contact:
Edward Sweeney, New York (1) 212-438-6643, [email protected]
Analyst Contacts:
Keith I Dickinson, San Francisco (1) 415-371-5036
Antionette W Maxwell, Chicago (1) 312-233-7016
Key Contacts:
Americas Media Relations: (1) 212-438-6667
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Americas Customer Service: (1) 212-438-7280
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