Overlake Hospital suffers downgrade as debt coverage challenge looms

Bellevue, Wash.-based Overlake Hospital Medical Center was downgraded on a series of bonds as the 310-bed hospital faces ongoing labor and inflationary challenges and the possibility of not meeting its debt coverage requirements, Moody's said March 9.

The community hospital on the Eastside of Seattle saw its rating on the bonds decrease from "A2" to "Baa1." The outlook remains negative.

While some of the labor pressures are expected to moderate, margins will remain weak compared with historical levels even as Overlake institutes a number of cash-preservation strategies, Moody's said.

"The downgrade to Baa1 reflects Moody's expectations that Overlake's margins will remain below historically strong levels through at least mid-fiscal 2024," Moody's said in the research note.

The hospital, which also operates several outpatient clinics and physician offices in its service area, has $295 million of outstanding debt.

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