EMHS credit rating downgraded
2/6/09 | 14 comments

EMHS credit rating downgraded


By Meg Haskell
BDN Staff
AP FILE PHOTO BY PAT WELLENBACH
“No one disagrees this is a problem,” said Trish Riley, director of the Governor's Office of Health Policy and Finance, about the payments owed to member hospitals in Eastern Maine Healthcare Systems. “But we can’t spend the stimulus money before we get it.” Buy Photo

BREWER, Maine — Standard & Poor’s financial services agency has downgraded Eastern Maine Healthcare Systems’ credit rating from A-plus to A-minus, largely based on the more than $115 million in backlogged Medicaid payments owed to the seven EMHS member hospitals by the state of Maine.

In addition, EMHS has experienced “weakening profitability” for the last three years and is operating at a loss in the current fiscal year, according to a report from Standard & Poor’s dated earlier this week.

The rating change will make it more costly for EMHS and its affiliates to borrow money for big-ticket purchases and construction, said Dan Coffey, vice president and chief financial officer at EMHS.

“This is a measurement of the creditworthiness of the entire system,” he said.

A state official said Friday that Gov. John Baldacci is committed to paying off old MaineCare debts to hospitals, but she questioned whether that debt should be blamed for EMHS’ rating drop.

“This is a long-standing problem and it hasn’t affected their bond rating before,” said Trish Riley, director of the Governor’s Office of Health Policy and Finance. Riley stressed the impact of the unstable state and national economies on all hospitals.

“A-minus is still a good, good rating,” she said.

Riley noted that language in the supplemental budget approved by state lawmakers last month would make it a priority to use a portion of anticipated federal economic stimulus funds to pay off some of the MaineCare debt to hospitals.

“No one disagrees this is a problem,” she said. “But we can’t spend the stimulus money before we get it.”

EMHS has maintained an A-plus rating since 2000, Coffey said. Last year, the overall rating was upheld despite Standard & Poor’s downgrade of the organization’s financial outlook from “stable” to “negative,” he said. That change reflected growing regional economic distress and a reduction in financial liquidity, or cash on hand, as well as developing budget problems within the organization, Coffey said.

“It was a combination of things, but liquidity is the most alarming [to Standard & Poor’s],” Coffey said.

That liquidity is profoundly affected by the more than $115 million Maine owes to the seven member hospitals in the EMHS system, according to Coffey, including more than $71 million owed to Eastern Maine Medical Center in Bangor, the system’s largest facility.

Standard & Poor’s credit analyst Cynthia Keller Macdonald said in the report that EMHS was spared a steeper drop in its rating because of its prior financial performance and the essential nature of the health care services it provides in the large geographic area it serves.

“This may not preclude a lower rating in the future if earnings do not rebound this year, if liquidity continues to diminish, or if debt or debt plans increase,” Keller Macdonald said. The report cites a planned $200 million expansion at EMMC, largely dependant on borrowed money, as a financial liability supporting the lowered credit rating.

“A stable outlook is possible if management decides not to proceed with a large project within the next several years and would therefore not be issuing substantial additional debt, or if the state makes substantial progress toward reducing its MaineCare receivables,” the report states.

Coffey said EMHS operated at a $1.2 million loss in the first quarter of the current fiscal year, which began Oct. 1. Cost-cutting measures are being implemented across the system in an effort to reverse the trend, he said, and all aspects of the planned expansion are under close review.

The total amount of unpaid MaineCare revenues owed to Maine hospitals is now about $424 million and continues to build each year, according to Mary Mayhew of the Maine Hospital Association.

The debt results from the state’s failure over the past several years, due to the strained fiscal environment in Augusta, to make up the difference between what it pays hospitals up front for MaineCare services each year and the value of the services actually provided.

“There is a considerable difference between what hospitals are paid and the number of [MaineCare] patients they see,” Mayhew said Friday.

The unpaid revenues date back as far as 2001, but the bulk of the claims date from 2005, 2006, 2007 and 2008. Mayhew said the estimated shortfall between what Maine hospitals were paid in 2008 and what they were owed is about $86 million.

Maine’s smaller hospitals do not have individual credit ratings, but instead borrow through the Maine Health and Higher Educational Facilities Authority, which issues tax-exempt bonds to private, nonprofit education and health care institutions, according to Mayhew.

In 2006, Baldacci and the Maine Hospital Association announced a three-year plan to pay off the MaineCare debt, which at that time was about $300 million. Mayhew said the governor continues to demonstrate his support for paying Maine hospitals the money they are owed, and she expressed optimism that federal stimulus funding, when it becomes available, might be used.

Not registered? Click here
E-mail this
Print this
Guidelines for posting on bangordailynews.com

Bangordailynews.com is pleased to offer a forum for readers to react to our stories, discuss them and provide additional information. We are reluctant to delete comments, but do reserve that right for those who abuse our forum. For more on using this site, please see our terms of service.

The primary rule here is pretty simple: Treat others with the same respect you'd want for yourself. What does that mean specifically? Here are some guidelines (see more):

Comments
14 comments on this item
On 2/7/09 at 7:00 AM, Mainecommenter wrote:         Repeated separate thumbs down will cause comment to be hidden

This has been a reoccurring problem with the Baldacci Administration. It makes on thinks that he's trying to starve the hospitals on purpose.

Report abuse
On 2/7/09 at 7:41 AM, Rick32 wrote:         Repeated separate thumbs down will cause comment to be hidden

Trish is as much an A-Hole as Baldacci “This is a long-standing problem and it hasn’t affected their bond rating before,” said Trish Riley. DUH. The world economy was much stronger until about 6 months ago - now people are holding off on elective medical care, reducing revenues in healthcare across the country. Now the money that Baldacci owes EMHS is creating a negative impact on liquidity. Riley needs to open up her Economics 101 book.

So as the state continues to rape the hospitals of Maine to support Baldacci's failed policies, the hospitals are supposed to pare back spending on growth and technology upgrades? Maybe they should stop construction on the new Cancer Care building - who gets cancer anymore?

Maybe EMHS should refuse to treat patients who cannot pay? That would increase liquidity too.

How does Baldacci get $424 million behind in payments to hospitals and still have a balanced budget and a AA bond rating?

That is the question we should all be asking

Report abuse
On 2/7/09 at 7:57 AM, agalwhoreads wrote:         Repeated separate thumbs down will cause comment to be hidden

You got it Rick32!! How can Baldacci have a balanced budget?? Seems to me he's lying!

It's about time BDN put this is print. Does everyone see this ~ "more than $115 million in backlogged Medicaid payments owed to the seven EMHS member hospitals by the state of Maine." The hospitals have done more than their fair share of free services to the state of Maine. Thank you hospitals!!

I expect to get paid for my work, I don't work for free. I would refuse to work for free. I have bills to pay. Baldacci, you wouldn't work for free either. And you don't! Baldacci, pay the hospitals!!

Report abuse
On 2/7/09 at 8:00 AM, yankeeman wrote:         Repeated separate thumbs down will cause comment to be hidden

Its time to boot this lowlife governor. He always gets his face on the news to take credit when something good happens, but always absent when his stupidity shows up. what a loser!

Report abuse
On 2/7/09 at 8:11 AM, BeaverFood wrote:         Repeated separate thumbs down will cause comment to be hidden

Perhaps Trish Riley will wake up when all the hospitals in Maine are bankrupt. She is largely responsible for this mess and refuses to listen to anyone other than herself.

Report abuse
On 2/7/09 at 9:08 AM, PabMainer wrote:         Repeated separate thumbs down will cause comment to be hidden

This is an insult for every citizen, family & busiiness that pays for & has private insurance in this state. I work for a smaller company that has been cutting costs and expenses to keep the doors open including making (us) the employees pay more for health insurance. So we pay more up front, have higher deductables, pay more out of pocket at the medical office, pharmacy and hospitals, and the State of Maine continues to default on monies owed to these hospitals...If ANY business in this state owed Federal or State monies like this the authorities would swoop in and lock the doors and demand payment along with interest and probable fines....the Gov and his administration are a disgrace to this state and should be run out of office!!

Report abuse
On 2/7/09 at 9:59 AM, Brewer wrote:         Repeated separate thumbs down will cause comment to be hidden

(Riley noted that ...would make it a priority to use a portion of anticipated federal economic stimulus funds to pay off some of the MaineCare debt to hospitals. “No one disagrees this is a problem,” she said. “But we can’t spend the stimulus money before we get it.” )

OK- Paying off bad debt from fiscal mismanagement is not a proper use for stimulus money ...how will that get the economy moving? Then the state can simply spend us into more debt. Barack Obama shouls say no way to this plan and demand Maine use the money to get this moving, not pay bills.

Report abuse
On 2/7/09 at 10:04 AM, payingattn wrote:         Repeated separate thumbs down will cause comment to be hidden

There's quite a disconnect between the view of the neutral S&P analyst and the governor's healthcare expert. Trish: “A-minus is still a good, good rating,” How good is a credit rating if it will now cost you much more to borrow money? Reminds me of an old expression: who are you going to believe? Me or your own eyes? Seems like this is a case of the state government committing to pay hospitals to provide healthcare before they figured out how to pay for it. There should be an obligation to pay very timely that is enforced. The irresponsibility of the governor and legislators is now putting a valuable community asset- a health system that provides care for the northern 2/3 of the state - in jeopardy.

If the solution is dependent on stimulus money - that's no solution at all. This will happen again. Governor and legislators: protect healthcare in Maine and pay the hospitals.

Report abuse
On 2/7/09 at 10:30 AM, SteveH wrote:         Repeated separate thumbs down will cause comment to be hidden

"Trish Riley, director of the Governor's Office of Health Policy and Finance - But we can’t spend the stimulus money before we get it.”

Sure Trish, but you are more than happy to have the hospital spend money they do not have. Typical political hypocrite full of double talk.

Report abuse
On 2/7/09 at 12:06 PM, JWBooth wrote:         Repeated separate thumbs down will cause comment to be hidden

Trish Riley and Marie 'Let them eat cake" Antoinette -- separated at birth.

Report abuse
On 2/8/09 at 9:43 AM, fredrogers wrote:         Repeated separate thumbs down will cause comment to be hidden

The real question is has anyone dropped a dime to the US Attorney General and SEC offices in DC?

How's does standard. & poors justify emhs rating against the state of maine rating where the state is $ 424 million behind in payments to hospitals and emhs pays it bills on time?

Talk about the old boys from wall st getting us into this financial mess, seems the boys are still at it!

Report abuse
On 2/8/09 at 11:37 AM, superchip06 wrote:         Repeated separate thumbs down will cause comment to be hidden

This is the problem with the whole government, It seems that none of them know how finances work. I guess that Trish Riley along with the Baldacci administration thinks that EMHS has all kinds of money to pay thier expenses without getting the money the state owes them, But I bet the first time the state thinks that the hospitals overcharge them there probably would be a big investigation. People Like Trish in August are the reason why this country and state are in the financial position that we are in. Trish blames it on the economic downturn but I would like to know what her excuse was before the economy went down the tubes.

Report abuse
On 2/8/09 at 2:53 PM, Brewer wrote:         Repeated separate thumbs down will cause comment to be hidden

...and it will only worsen as more and more jobs and industry are lost in Maine, forcing more and more people onto MaineCare (medicaid) and then more unpaid bills to Maine hospitals. People can't afford healthcare until they are very, very sick - no preventative healthcare - and then they seek emergency care. Non for profit hospitals, such as the hospitals of EMHS, must provide treatment and they don't get paid. What is the status of Dirigo health? How many enrolees are there in that failed program? And how well does that progam reimburse?

$115 million is simply outrageous....

Report abuse
On 2/8/09 at 3:01 PM, David889327 wrote:         Repeated separate thumbs down will cause comment to be hidden

Could it be that the State is going to let this develop into enough of a crisis that the only solution will be a tax? $1000 for every family in Maine would more or less cover it.

Report abuse
You must be logged in to post a comment. click here to log in.

Powered by: Creative Circle Advertising Solutions, Inc.