Less than a week after Bangor’s Eastern Maine Medical Center announced a $7 million shortfall, its parent organization is touting a healthy balance sheet and strong financial future.
How can that be? Here’s a closer look.
Eastern Maine Healthcare Systems issued a press release Wednesday announcing that Standard & Poor’s issued a “positive outlook” for the Brewer-based organization, a show of confidence in its fiscal prospects.
The rating agency also weighed in on EMHS’ current financial picture, affirming the rating it gave more than a year ago on nearly $144 million in bonds the organization’s using to fund a $250 million tower project at EMMC. S&P maintained a BBB rating of the bonds, its ninth-highest rating. The grade reflects S&P’s opinion of EMHS’ financial strength and its ability to pay the bonds in a timely manner.
The S&P report, issued on March 7, highlights the good and the bad of EMHS’ financial picture.
On the good side, EMHS has huge market share, serving 73 percent of patients in the Bangor area, 24 percent in the Portland region, and nearly 50 percent in northern Maine, the report states. The tower project, while still in the early stages, remains on budget and on schedule for a late 2015 opening. The organization’s incorporation of Portland’s Mercy Health System of Maine has gone well, costing money but less than expected so far.
On the bad side are the weak earnings at EMMC, the flagship among its eight hospitals, and the need for more debt and equity to finance the tower and other projects.
Overall, S&P’s expressing measured confidence that EMHS’ position as a dominant health care player, coupled with its health reform efforts, will hold the organization in good stead. While the first-quarter shortfall at the EMMC is cause for concern on the day-to-day operating side, S&P’s looking much further ahead, judging that EMHS can make good on its bonds in the coming years.
Deborah Carey Johnson, EMMC’s president and CEO, addressed the shortfall in the release, saying while the hospital’s “not currently where it would like to be” budget wise, it has set goals for growth and expects to end the year in the black.
S&P noted that management’s plan to improve EMMC’s financial performance “has been slow to gain traction,” as the organization looks to save an overall $66 million by cutting costs and boosting revenues.
M. Michelle Hood, president and CEO of EMHS, said in the release that EMHS is carrying a much lower debt load compared to similarly S&P-rated healthcare systems.
“This is a strong indicator of tight management of both the income statement and balance sheet over many years,” she said.