While it is no secret hospitals nationally are struggling with operating margins, Jackson-Madison County General Hospital is no exception.
With costs rising dramatically, the West Tennessee Healthcare Revenue Bond rating outlook has been revised to negative on continued weak operations, reserves.
“In January 2023, S&P Global Ratings revised the outlook to negative from stable and affirmed its ‘A-‘ long-term rating on the City of Jackson, Tennessee’s various series of health care revenue bonds, issued for Jackson-Madison County General Hospital (JMCGH) doing business as West Tennessee Healthcare (WTH),” said Amy Garner – WTH’s Chief Compliance & Communications Officer, “The outlook revision reflects WTH’s ongoing operating pressures originally stemming from elevated integration costs, which have been further exacerbated by the pandemic.
“In addition, the negative outlook reflects WTH’s lower reserves providing limited cushion as operating pressures continue.”
S&P Global Ratings revised the outlook to negative from stable and affirmed its ‘A-‘long-term rating on the City of Jackson, Tenn.’s various series of health care revenue bonds, issued for Jackson-Madison County General Hospital (JMCGH) doing business as West Tennessee Healthcare (WTH).
“The outlook revision reflects WTH’s ongoing operating pressures originally stemming from elevated integration costs, which have been further exacerbated by the pandemic,” said S&P Global Ratings credit analyst Blake Fundingsland. “In addition, the negative outlook reflects WTH’s lower reserves providing limited cushion as operating pressures continue.”
The bonds are secured by a gross revenue pledge of the obligated group, which includes the flagship tertiary facility, JMCGH.
The rating reflects our view of WTH’s dominant market share, consistently around 67% in the broad but relatively rural service area.
The rating also incorporates a favorable holistic adjustment, which integrates WTH’s size and scale, with seven hospitals serving 19 counties throughout Tennessee and Missouri, helping mitigate risks when compared with other stand-alone providers.
This size and scale help offset localized shifts in the competitive landscape including the recent partnership between the Jackson Clinic and Baptist Memorial Health Care (Baptist Memphis) to open an outpatient surgery center in the fall of 2023.
WTH invested heavily in its own medical group to avoid service interruptions from this shift, and we expect that, with the investment and significant reduction in reliance on Jackson Clinic, the competitive landscape will not diminish WTH’s current strength.
The negative outlook reflects WTH’s delays in integrating new facilities resulting in operating losses and a spend down of reserves to levels below rating expectations. The negative outlook further reflects the possibility of additional debt to fund capital projects when WTH’s leverage is already elevated for the rating.
We expect WTH will maintain its historically dominant market position as integration continues and access is expanded with the understanding that a decline in market position could also pressure the rating.
Moody’s ratings are expected to be published in May 2023.
