S&P downgrades Holy Redeemer Health System credit rating

Standard & Poor's on Thursday downgraded Holy Redeemer Health System's credit rating by one notch, to "BBB" from "BBB+," citing weaker-than-expected operating performance in the year ended June 30 and continued deterioration in the quarter ended Sept. 30.

In fiscal 2017, Holy Redeemer, which has a 258-bed hospital in Meadowbrook, Montgomery County, posted an operating loss of $4 million on revenue of $392.8 million in fiscal 2017. That compared to a small gain of $956,000 on $392 million in revenue the year before. In the September quarter, Holy Redeemer's loss widened to $5.4 million from $3.2 million the year before.

"While we respect the opinion of S&P Global Ratings, we feel differently and are confident about our future," Holy Redeemer said in a statement. Holy Redeemer is well positioned for the transition to payments that pay for results rather then volume of care, the system said.

S&P said the losses were attributable to a significant increase in so-called hospital observation stays, which don't pay full inpatient rates, and reimbursement pressure in the health system's home health business. In the three months ended Sept. 30, Holy Redeemer had 1,087 short-term observation stays, up from 435 in the corresponding quarter a year earlier.

"We understand management has implemented a robust revenue enhancement and cost-saving plan as part of its mitigation strategy to achieve break-even results by 2019. However, we believe this could be challenging due to the current industry stress," S&P said.