Moody's downgrades 2 health systems

Moody's on June 12 downgraded the ratings of two health systems:

Overlake Medical Center 

Moody's downgraded Bellevue, Wash.-based Overlake's rating to "Baa2" from Baa1." Its outlook has been revised to stable from negative. The ratings agency said the downgrade was driven by the system's weakened liquidity position and expected slow recovery of financial performance.  

Moody's added that although most acute stress is behind Overlake, it will take the system several years to "return to margins sufficient to rebuild liquidity to levels commensurate with the higher rating." 

The ratings agency said the stable outlook reflects its view that financial performance will remain stable, but muted for the next two years and that Overlake will satisfy upcoming debt covenants.

Jackson Hospital

Moody's downgraded Montgomery, Ala.-based Jackson Hospital & Clinic's rating to "Caa2" from "B1." Its outlook remains negative. Moody's said the downgrade reflects its projection of Jackson's "deteriorated cash flow and financial position which has resulted in failure to make rental payments."

The downgrade also reflects " significant uncertainty around the degree of financial deterioration at the hospital given the lack of recent audited financials," Moody's said. It added that despite efforts to enhance revenue cycle and improve operating performance, material deficits will likely persist given the system's "modest size of operations and limited financial flexibility."

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