Wake Forest Baptist’s A1 rating is under review by Moody’s
WINSTON-SALEM, N.C. — Moody’s Investors Service has placed Wake Forest Baptist’s A1 rating under review for possible downgrade, Moody’s said in a statement on its website, according to the Winston-Salem Journal.
Moody’s is also placing North Carolina Baptist Hospital’s A1 rating, which it considers a separate entity for oversight purposes, under review for possible downgrade.
The rating is based on nine months’ interim financials for fiscal year 2014, including a $103.8 million write-off of accounts receivable. This affected the 2013 and 2014 fiscal years. A full report will be released later.
Moody’s said that “exclusive of the write-off, interim results remain very weak and will not meet 2014 budget. Our review will focus on the organization’s turnaround plans and timing for improvement in cash flow metrics.”
C. Michael Rutherford, chief financial officer for Wake Forest Baptist Medical Center, said that Wake Forest Baptist “continues to aggressively implement strategies toward a value-based academic health care model with emphasis on safety, service and quality. We are listed among the 100 Great Hospitals in America by Becker’s Hospital Review, in large part due to our safety and quality measures ranking among the best in the nation.”
He said that the medical center’s financial setbacks are fixable, “and we are committed to restoring the medical center to improved levels of financial performance going forward.”
The review by Moody’s could lead to the medical center’s second downgrade since March 2013. At the time, Moody’s said the downgrade to A1 from Aa3 would affect $597.2 million of rated outstanding debt.
In November 2013, the credit-rating agency expressed confidence in Wake Forest Baptist Medical Center’s ability to return to profitability in fiscal 2013-14. The agency affirmed in November the debt rating of A1 and the stable outlook.
Moody’s analyst Lisa Goldstein wrote in Moody’s November report that “the stable outlook reflects material expense reductions, some of which have already been implemented, and management’s efforts to stabilize operations.”
Wake Forest Baptist announced in May that it wrote off the $103.8 million in uncollectable payments. This contributed to a $154.7 million operating loss through three quarters of fiscal 2013-14.
When factoring in $37.7 million in investment income, the overall loss was reduced to $116.7 million.