Monongalia Health System, WV's Revenue Bond Rating Lowered To 'BBB+' From 'A-' On Operating Losses; Outlook Negative

CENTENNIAL (S&P Global Ratings) Dec. 7, 2018--S&P Global Ratings lowered its 
rating on Monongalia County Building Commission, W. Va.'s revenue bonds, 
issued for Monongalia Health System (Mon Health) to 'BBB+' from 'A-'. The 
outlook is negative. 

"The lower rating and negative outlook reflect the hospital's significant 
operating loss in fiscal 2018 and through the three-month interim period ended 
Sept. 30, 2018, and the expectation of continued operating losses through 
fiscal 2019," said S&P Global Ratings credit analyst Chloe Pickett.

The lower rating also reflects the volatility of the hospital's management 
team, which resulted in direct negative financial impact.

The rating reflects our opinion of the hospital's:
  • Stable, albeit not leading, market position despite competition from the state's flagship academic center;
  • Solid unrestricted reserves and days' cash on hand; and
  • Healthy local economy, stabilized by a large student population at West Virginia University.
Offsetting factors include the hospital's:
  • Significant operating losses in fiscal 2018 and through the three-month interim period ended Sept. 30, 2018;
  • Relatively small size--less than 10,000 inpatient admissions--with a moderately high reliance on a small group of active physicians; and
  • Above-average debt resulting in weak unrestricted reserves-to-long-term debt.
Mon Health's main hospital is a 185-staffed-bed, acute-care facility in 
Morgantown, 60 miles south of Pittsburgh. Mon Health also includes Preston 
Memorial Hospital, a 25-bed critical-access hospital in Kingwood, about 27 
miles southeast of the main hospital; and Stonewall Jackson Memorial Hospital, 
a 74-bed hospital almost 67 miles southwest in Weston.

The negative outlook reflects the expectation of further operating losses over 
the outlook period. Although management is implementing a large-scale 
performance improvement plan in fiscal 2019, we expect operating margins to 
remain negative. Further, although the relationship between management and 
physicians continues to improve under the new management, we view the strained 
relationship as an ongoing credit concern.

We would lower the rating if Mon Health cannot make meaningful progress to 
achieve budgeted expectations in fiscal 2019 or if unrestricted reserves 
deteriorate significantly. We would also lower the rating if the system's 
market position weakens materially. 

While we are unlikely to raise the rating over the outlook period, we would 
revise the outlook to stable if Mon Health meets or exceeds budget in fiscal 
2019 while maintaining its current market position.
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