Quorum negative credit outlook partially reflects risk associated with revenue cycle transition

Moody's Investors Service downgraded Quorum Health's credit rating two notches to "Caa2." The 24-hospital system's rating outlook is negative.

Moody's said the two-notch downgrade reflects credit challenges such as weak liquidity, high financial leverage, high refinancing risk and uncertainty regarding whether and when the Brentwood, Tenn.-based hospital operator's divestiture plan will be completed.

The rating agency said the negative outlook also reflects high execution risk associated with Quorum transitioning revenue cycle management functions to R1 RCM and advancing its initiative of hospital divestitures, among other factors.

Quorum, a spinoff of Franklin, Tenn.-based Community Health Systems, announced the revenue cycle transition May 8, affecting hospitals and outpatient centers in 14 states.

"Executing the transition of these services presents a significant risk," Moody's said. However, "if Quorum can successully transition off of these services to different vendor platforms such as R1 RCM without disruption, we believe it would lower costs, improve collection rates and enhance business flexibility relative to its arrangements with" CHS. 

Overall, it believes Quorum's divestitures, efficiency efforts and other actions "will lead to improvement in operating performance over time," Moody's said.   

 

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