Moody's Investors Service said Quorum Health could face a rating downgrade next year if the Brentwood, Tenn.-based company doesn't see the annual financial boost it expects from divestiture efforts and a new revenue cycle management outsourcing arrangement, according to NashvillePost.com.
Moody's analysts affirmed the debt ratings on Quorum Sept. 23, and changed the outlook for the for-profit company from stable to negative.
The agency said the affirmations of the ratings were based on Moody's expectation that Quorum's earnings will strengthen over the next year.
However, Moody's said it believes "that the magnitude of earnings improvement will be highly contingent on the successful execution of both divestiture efforts and plans to augment its revenue cycle management."
Quorum announced in May that it is outsourcing RCM services to R1 RCM, and anticipates a $50 million annual boost from the deal by 2021. The company, a spinoff of Franklin, Tenn.-based Community Health Systems, also revealed plans to continue selling off hospitals.
Moody's said Quorum's new outlook is based on the high risk associated with execution of its divestiture efforts and revenue cycle plans as well as "rising refinancing risk if these initiatives do not begin to take hold over the next six to nine months."
"Failure to show significant improvement in earnings over the next several quarters will likely result in a downgrade," the agency added.
Read the full Moody's report here.
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