$35 million bond affirmed at 'A"
Fitch IBCA has affirmed its "A" rating on the outstanding $35 million
Sharon Regional Health System Authority's revenue bonds, series 1998.
Sharon Regional's consistently strong debt service coverage, favorable
and increasing market share, moderate debt load, the benefits of a
new open heart surgery program and experience of management support
the rating affirmation. Over the past four years, SRHS has had an
average maximum annual debt service coverage by earnings before interest,
taxes, depreciation and amortization of four times. Additionally,
the System has had solid operating and excess margins. This success
can be attributed to Sharon Regional's increasing market share, which
has risen from 36.1 percent in 1995 to 39.1 percent in 1999, while
the market share of other local health care institutions have decreased
for the same period.
Sharon Regional's management team has also had a large impact on the
financial performance and market share trends over the last four years.
The most recent initiative undertaken by management involves the development
of a Heart Institute to expand cardiac services to include open heart
surgery and angioplasty. Of the $8 million capital estimate for the
project, SRHS will borrow $4 million from the VHA with the balance
coming from its liquidity. Projections indicate the project will increase
operating margins to 5.5 percent by 2004.
Fitch IBCA believes Sharon Regional will continue to be the major
provider in a relatively stable service area. The expansion of such
services as the Heart Institute will allow the system to continue
to compete effectively in the region, although this will be tempered
by potential reductions in Medicare reimbursements. Fitch IBCA believes
Sharon Regional's operations will remain stable or improve, which
will lead to a continually strengthening balance sheet.