Baptist Memorial Health Care Corp., TN Bond Rating Outlook Revised To Negative On Operating Losses

DALLAS (S&P Global Ratings) Feb. 7, 2019--S&P Global Ratings revised its 
outlook to negative from stable and affirmed its 'BBB+' long-term rating on 
various series of debt issued for Baptist Memorial Health Care Corp. (BMHCC), 
Tenn. In addition, we affirmed our 'A-2' short-term rating on BMHCC's 2009 
taxable commercial paper (CP) program and on the term rate portion of the 
series 2004B-2 bonds. 

S&P Global Ratings also revised its outlook to negative from stable and 
affirmed its 'BBB+' long-term rating on the Mississippi Hospital Equipment and 
Facilities Authority's series 2007A and 2015A revenue bonds issued for 
Mississippi Baptist Health Systems Inc. (MBHS), which was added to the BMHCC 
obligated group in August 2017. The Jackson-based MBHS was acquired through a 
member substitution in May 2017. MBHS' three critical access hospitals remain 
outside the obligated group but are incorporated into this review. 

"The outlook revision reflects BMHCC's substantial operating losses in fiscal 
2018, well below management's aggressive breakeven target," said S&P Global 
Ratings credit analyst Patrick Zagar. At last review, the system had been 
showing incremental improvement in operations, with losses generally narrowing 
from 2014--albeit at a pace slower than budgeted by management. The $166 
million operating loss in 2018 represents a sizable regression for BMHCC and a 
continuation of stubbornly negative operations. 

We could consider a lower rating if BMHCC experiences below budget performance 
in fiscal 2019; considering we believe BMHCC must display a clear trend of 
improvement to maintain the rating, results that do not indicate such a 
turnaround would pressure the rating. Further decline in unrestricted reserves 
or days' cash on hand, or any weakening in the system's market position, could 
also result in a downgrade. 
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