King's Daughters fails to file annual report as financial woes continue

Bondholders of King's Daughters Medical Center in Ashland, Ky., received notice this month that the hospital failed to file its annual report—capping off a challenging year that has already led to a credit-rating downgrade.

King's Daughters, the largest hospital by bed count in Kentucky, could not be reached for comment at deadline regarding why its financial report was delayed (PDF). The 612-bed hospital, which has a Sept. 30 fiscal yearend, will hold a call March 26 to provide an update for investors.

Fitch Ratings last month downgraded five series of bonds from A+ to A with a negative outlook. The ratings agency cited a “significant deterioration in operating performance,” as both inpatient and outpatient volume decreased.

The hospital operates in a challenging region facing declining population growth and low household incomes. About 15% of its patients are on Medicaid and another 7% self-pay.

King's Daughters is also the subject of a U.S. Justice Department investigation into whether it complied with Medicare criteria for implanting cardiac devices between 2006 and 2011 after a high number of procedures were performed.

In its first quarter ended Dec. 31, King's Daughters reported an operating loss of $17.7 million (PDF) compared with a loss of $595,000 for the same period the prior year. Its operating margin declined to negative 15.7% compared with negative 0.5% for the first quarter of fiscal 2013.

Admissions fell 14.2% quarter over quarter.

The hospital in December named Kristie Whitlatch, its chief operating officer, as its new president and CEO (PDF), replacing Fred Jackson, who announced his retirement after 17 years leading the organization.

A financial improvement plan was implemented in late fiscal 2013 that focuses on its revenue cycle, staffing productivity, supply chain and service lines, Fitch said. A total of 300 full-time employees have been eliminated since August.

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