Fitch Ratings has downgraded the rating on approximately $21.45 million in fixed rate bonds issued by Iron Mountain, Mich.-based Dickinson County Healthcare System from "BB-" to "B."
DCHS has shown improving operations, posting a gain of $484,000 for the six months ended June 30, compared with an operating loss of $3.8 million in the first half of 2013. The health system also has a dominant market share in its primary service area: 87 percent for inpatient and 77 percent for outpatient in 2013. However, the health system has weak liquidity metrics of 29.8 days cash on hand, 1.7x cushion ratio and 27.4 percent cash-to-debt, which provide a "very limited cushion against negative operating variability," according to the ratings service. DCHS also has a relatively high debt burden, with maximum annual debt service at 4.6 percent of revenues.
Fitch has also affirmed a negative rating outlook for the system, reflecting concerns about continued balance sheet deterioration despite operational improvement.