Standard & Poor's Corp. revised its outlook for Orange, Calif.-based St. Joseph Hospital System's AA bond rating to "negative" from "stable."
Although the system continues to perform strongly, its acquisition of Mission Hospital Regional Medical Center in Mission Viejo, Calif., will weaken its balance sheet, the New York-based credit-rating agency said.
St. Joseph's purchase of 264-bed Mission Hospital on Sept. 1 for an estimated $150 million adds a third Orange County hospital to its network, Standard & Poor's said. The formerly for-profit Mission Hospital had higher debt-to-capital levels and lower cash reserves than would be consistent with St. Joseph's AA rating, the agency said.
Given the hospital's past performance, the as-yet-unproven benefits of the three-hospital alliance in Orange County and the competitiveness of the markets in which St. Joseph operates, Standard & Poor's questions the system's ability to maintain an AA rating. "Issuance of additional debt would increase burdens, and could cause a rating downgrade," the agency said.