Ohio hospital hit with 2-notch credit downgrade amid IT transition

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Moody's Investors Service downgraded Lancaster, Ohio-based Fairfield Medical Center's revenue bond rating to "Ba2" from "Baa3." The rating outlook is negative.

Moody's said the two-notch downgrade reflects risks that the hospital will face as it transitions to a new IT system.

"While FMC will likely see improved operating results following a very weak fiscal 2018, recovery will be slower than anticipated, in part hampered by weak volume trends attributed to both the IT project as well as the loss of a key physician for a period of time during 2019," Moody's said.

The 222-bed hospital has seen liquidity metrics decline due to IT billing and collection issues, but management expects these metrics to improve as collection matters are resolved.

The negative outlook also reflects Moody's belief that the hospital will face challenges as it completes the transition to its new clinical and billing IT system.

"This will contribute to protracted weakness in margins and cash metrics and, along with rising debt levels and small size, will result in higher uncertainty," Moody's said.

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