Investor service company downgrades ProMedica’s bond rating

Oct. 27--Financial challenges associated with Paramount, the insurance subsidiary of ProMedica, have caused a financial services company to downgrade the health care system's bond rating to just above "junk" status, records show.

Moody's Investor Services, the bond credit rating business of Moody's Corporation, headquartered in New York City, made the announcement last week, citing a "very weak year-to-date fiscal 2019 performance and expected material shortfalls in cash flow and liquidity," over the next three years for ProMedica.

ProMedica was downgraded from a "Baa1, with a negative outlook (lower medium grade)," rating to a Baa3, with a negative outlook, rating. A Baa3 rating is the lowest scale in the lower medium grade prime and is placed just above Ba ratings, which represent "speculative," or "junk" ratings. The downgrade is ProMedica's second such drop from Moody's since it acquired HCR ManorCare, the nation's second-largest post-acute care provider, in 2018.

In a news release announcing its decision, Moody's wrote, "the post-acute care operation projects margins below initial projections in part because of declining Medicare census at nursing homes, which make up about two-thirds of post-acute revenue. Expected synergies from the 2018 acquisition of HCR ManorCare will be slower than expected."

Tausha Moore, a spokesman for ProMedica, acknowledged in a statement that Moody's had lowered ProMedica's rating. She said the downgrade was due to Paramount's financial struggles associated with the Ohio Medicaid program.

"The downgrade is primarily the result of challenges our Paramount business has had with Ohio Medicaid over the past year and the resulting impact on our finances," the statement read. "We are continuing to work collaboratively with the Ohio Department of Medicaid, and we are confident we will find an acceptable resolution that will allow us to serve this population in a financially viable manner."

ProMedica posted nearly $50 million in second-quarter operating losses in August, according to records, which noted that "the losses in the insurance division were attributable exclusively to the Paramount Advantage (Medicaid) product line."

Company representatives haven't changed their position about Medicaid since first suggesting in June that ProMedica may cease operations of the state-run program if it became financially unsustainable.

Ms. Moore said the health care system remains confident in its finances, despite the downgrade.

"In the meantime, ProMedica continues to have a strong balance sheet, with approximately $1.5 billion in cash to support its financial stability," she said in a statement. "We are confident about our future and our ability to strengthen ProMedica's financial standing."

___

(c)2019 The Blade (Toledo, Ohio)

Visit The Blade (Toledo, Ohio) at www.toledoblade.com

Distributed by Tribune Content Agency, LLC.