The embattled Broward Health system faced more bad news Friday. Moody's Investors Service downgraded its bond rating, citing changing leadership, heightened scrutiny on the system and losses from a recent legal settlement.
The downgrade—to Baa2 from A2—follows months of turmoil for the system. The system reportedly faces state and federal investigations. Its CEO, Nabil El Sanadi, killed himself in January. And in September, Broward agreed to pay the government about $70 million to settle allegations it illegally paid doctors for referrals.
Art Wallace, Broward interim chief financial officer, said in a statement that Broward Health is disappointed by the downgrade but not surprised given recent events.
“We are dealing with a substandard start of the fiscal year and the financial impact of a $70.7 million settlement at the same time we adjust to the sudden loss of our CEO,” Wallace said. “The positive news is that the system and board are taking active steps to address both the leadership and financial issues.”
He said the system plans to start a search process soon for a permanent CEO. He also said Broward has entered into the corporate integrity agreement that was part of the settlement “on-time and on-target.” He said the first month of this year “looked more favorable,” and February business volumes were strong.
“Our credit ratings have increased in the past and they will once again,” Wallace said.
Moody's also assigned the system a negative outlook on its ratings that it said reflects “extremely thin cash flow during FY2016 without a clear plan for regaining operational balance, while in a period of significant senior leadership transition and external scrutiny.”
Florida Bulldog, a not-for-profit investigative journalism organization, has reported that the FBI is investigating claims of corruption at the system based on evidence gathered by a corporate private investigator who says he was hired by the former CEO.
Moody's did note, however, that the new Baa2 rating reflects the system's important role as a large public health system and unrestricted liquidity that exceeds debt. Moody's also said the system could be upgraded if it fills senior positions with strong leaders with strategies for “solidifying market niche, growing patient volumes and improving core operations and debt service coverage.”
Broward Health includes five medical centers and hospitals and had operating revenue of $971 million in 2014, according to Modern Healthcare's financial database.