Craig Hospital, CO Series 2012 Revenue Bond Rating Raised To 'A+' From 'A' On Positive Operations

CENTENNIAL (S&P Global Ratings) Nov. 30, 2018--S&P Global Ratings raised its 
long-term rating on the Colorado Health Facility Authority's series 2012 
hospital revenue bonds, issued for Craig Hospital, to 'A+' from 'A'. The 
outlook is stable. 

"The higher rating reflects Craig's consistently positive operating 
performance, contributing to maximum annual debt service coverage above 
medians for the rating level," said S&P Global Ratings credit analyst Chloe 
Pickett. 

The rating reflects our view of Craig's:
  • Leading business position;
  • Continued healthy operating profitability and cash flow; and
  • Good payer mix and favorable reimbursement.
Partially offsetting the above strengths, in our view, are the hospital's:
  • Limited revenue base;
  • Narrow service line offerings; and
  • Heightened capital spending over the coming years, which could slow cash growth.
Craig is the leading long-term acute care and rehabilitation hospital 
specializing in spinal cord and traumatic brain injuries in Colorado and 
surrounding states.

The stable outlook reflects our expectation that Craig will maintain positive 
operating results in fiscal 2018, with healthy maximum annual debt service 
(MADS) coverage and ample unrestricted reserves. We understand that the 
hospital's capital plans could include some additional debt over the next 
one-to-two years and we believe that Craig can absorb the planned debt at the 
higher rating level.

Although we do not expect to do so, we could consider lowering the rating if 
operations decline such that the hospital's MADS coverage weakens to levels 
consistently below medians. We could also consider a negative outlook or 
rating action if Craig issues a significant amount of debt, such that its debt 
burden and cash-to-debt levels decline to levels that are below rating 
medians. We also view the hospital's business position as a key credit 
strength and, while we don't expect it, deterioration of its market position 
or changes in reimbursement models could stress the rating. 

Although unlikely over the outlook period, we could raise the rating beyond 
then provided that Craig increases unrestricted reserves, as measured by an 
improvement in cash to debt to a level that exceeds medians at a higher 
rating, while sustaining robust operations and MADS coverage. 
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