Moody's to Review Beebe Medical Center's Bond Rating Amid Class Action Lawsuit

Moody's Investors Services has officially placed the Ba3 bond rating of Lewes, Del.-based Beebe Medical Center on review with an "uncertain" direction in light of the hospital's pending class action lawsuit and settlement involving a former pediatrician who was a pedophile.

Beebe has reached a settlement, in principle, that will exceed $100 million for patients and families who received care from Earl Bradley, MD. Dr. Bradley was arrested in December 2009 and convicted in August 2011 for raping or abusing 86 patients, many of whom were young girls. The lawsuit accused Beebe of negligence and dereliction of duty after it cleared Dr. Bradley of any wrongdoing and allowed him hospital privileges up to his arrest.

Despite the ongoing legal proceedings, Moody's analysts said the hospital is still maintaining stable operations with a 0.8 percent operating margin, a 7.5 percent operating cash flow margin and 85 days cash on hand as of June 30, 2012.

Moody's plans to issue a rating action within 90 days of when a settlement is finalized, and Beebe could potentially receive a credit upgrade if the legal liabilities are capped near the hospital's current reserve levels. "The rating under review direction uncertain is based upon the possibility the bond rating could be upgraded or downgraded depending on the final executed settlement terms and total financial exposure to Beebe," according to the report.

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