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Fitch Rates Cullman Regional Medical Center (Alabama) $50MM Healthcare Revs 'BBB-'; Stable Outlook.



NEW YORK New York, state, United States
New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of
 -- Fitch Ratings Fitch Ratings

An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris.
 assigns a 'BBB-' rating to the $50 million The Medical Clinic Board of the City of Cullman - Cullman Medical Park South (Cullman Regional Medical Center) (CRMC CRMC Coastal Resources Management Council (Rhode Island)
CRMC Capital Research and Management Company
CRMC Capital Region Medical Center (Jefferson City, MO, USA) 
) revenue bonds series 2007A. Proceeds of the new issue will be used to refinance certain debt of Cullman Regional Medical Center (CRMC) including all of the hospital's outstanding 2005B bonds, a portion of the hospital's outstanding 1993A bonds, and capitalized lease obligations; to fund various capital expenditures, fund a debt service reserve fund; and pay for costs of issuance. The bonds priced on October xx through negotiation by Merrill Lynch & Co. and Frazer Lanier Company. The Rating Outlook is Stable.

The 'BBB-' rating is supported by the hospital's leading inpatient market position with a 47.7% market share in a growing service area, liquidity that is ahead of Fitch's 'BBB' rating medians, and the development of a clinical affiliation with the University of Alabama at Birmingham UAB began in 1936 as the Birmingham Extension Center of the University of Alabama. Because of the rapid growth of the Birmingham area, it was decided that an extension program for students who had difficulties which prevented them from studying in Tuscaloosa was needed.  Medical Center (UAB UAB Universitat Autònoma de Barcelona
UAB University of Alabama at Birmingham
UAB Union of Arab Banks
UAB Uzdaroji Akcine Bendrove (Lithuanian: closed stock company
UAB Unix AppleTalk Bridge
UAB Unaccompanied Air Baggage
UAB Until Advised By
). Its next closest competitor, Woodland Medical Center, has a market share of 16.4%.The hospital is the only Level II trauma center In the United States a Level II trauma center provides emergency medicine to trauma patients. A Level II trauma center works in collaboration with a Level I trauma center. It provides comprehensive trauma care and supplements the clinical expertise of a Level I institution.  and provider of interventional cardiology interventional cardiology Cardiology The subspecialty of cardiology dedicated to the diagnosis, medical and mechanical therapy, pre- and post-procedure management of adult patients with acute and chronic forms of cardiovascular disease amenable to catheter-based  services between Birmingham and Huntsville. Most recent financial performance, CRMC had 124.1 days cash on hand compared to Fitch's median for the BBB category of 120.3. In August 2007, CRMC entered into a clinical affiliation with UAB for the development of a heart and vascular institute at the hospital, which Fitch views favorably.

Concerns include recent operating difficulties and heavy debt burden as a result of CRMC's decision to disaffiliate dis·af·fil·i·ate  
v. dis·af·fil·i·at·ed, dis·af·fil·i·at·ing, dis·af·fil·i·ates

v.tr.
To remove from association.

v.intr.
To end an affiliation.
 itself from Baptist Health System (BHS BHS

beta-hemolytic streptococci.
) of Birmingham, increasing competition from entrepreneurial physicians and other free standing surgery centers, and a high concentration of admissions from the hospital's top ten physicians. In November 2005, CRMC bought out the 50% BHS interest for $19 million, which was funded by debt. Following the buy out of BHS' share of the hospital, operational difficulties ensued including management turnover, physician disaffection leading to declining utilization, and lack of in-house operating systems.

Operating income, and leverage indicators were all adversely affected in fiscal 2005 and 2006. In 2005, CRMC lost $203,000 from operations followed by a $7.7 million loss in fiscal 2006. Additionally, debt to capitalization increased from 52.8% to 74.1%. Fitch's median for the rating category is 47%. CRMC has addressed all of the issues, beginning with the engagement of a new management team in fiscal 2005, adding physician representation to the board, and has had 14 months of positive operating performance. In fiscal 2007 (year ending June 30), CRMC lost $1.1 million from operations (negative 1.1% operating margin) and earned $1.9 million in excess income (1.7% excess margin) compared to Fitch's medians of 2.2% and 3.8%, respectively. Pro forma maximum annual debt service (MADS) coverage is 2.0x compared to Fitch's median of 3.0x. Pro forma debt burden ratios are high compared to Fitch's medians

The Stable Rating Outlook is supported by Fitch's expectation that management stability, an improving physician relationship leading to stable utilization trends, coupled with the affiliation with UAB, will lead to continuation of the positive trend in financial performance. The hospital has no plans to issue any additional debt.

Cullman Regional Medical Center is an acute care general hospital with 115 beds in service, located in Cullman, AL which is 50 miles north of Birmingham. CRMC covenants to disclose quarterly unaudited (within 60 days) and annual audited financial statements (within 120 days) to the nationally recognized municipal security information repositories (NRMSIRs).

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 of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental  are also available from the 'Code of Conduct' section of this site.
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Publication:Business Wire
Date:Oct 17, 2007
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