Once again, financial and operating weakness at CHS raises serious questions for healthcare in northeast Indiana. NICHE wants CHS to succeed in our region. To do so, CHS must invest for quality and growth – especially quality. As things are, Lutheran Health Network (LHN) is struggling with older equipment and disappointing patient experience due, we believe, to short-staffing that overloads everyone from nurses to custodians. We see strong evidence that LHN can no longer recruit the best and the brightest. Being straitened financially (in fact, in danger of failure) makes CHS’ promise to invest and build locally difficult to believe. It is imperative that CHS directs local profits to local projects. Moody’s Investor Service supports that opinion in an article (available for purchase) entitled: CHS/Community Health Systems, Inc: Divestitures not enough to drive deleveraging.
Moody’s Investor Service downgraded CHS ratings in several areas:
• A downgrade of CHS’ Corporate Family Rating from B2 to B3
• A downgrade of CHS’ probability of default rating from B2-PD to B3-PD
• The downgrade of CHS’ senior unsecured notes from Caa1 to Caa2
CHS’ B3 Corporate Family Rating reflects Moody’s waning confidence that the company will continue to operate with very high financial leverage over the next 12 to 18 months. Moody’s also commented that industry-wide “headwinds” will make it difficult for CHS to succeed with its “turnaround initiatives.” Moody’s assigned a debt to earnings ratio of about 7.0 to the current financials and speculated that another downgrade might be needed if that ratio increased debt to 7.5 times earnings (EBITDA.)