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S&P cuts rating on bonds for Crozer

An operating loss over 5 quarters and weak liquidity were cited.

Citing "an unexpected operating loss" in fiscal 2007 and the first quarter of 2008 and "persistently weak liquidity," Standard & Poor's has lowered its rating on bonds issued on behalf of Crozer-Chester Medical Center.

S&P said the outlook was stable. The lower rating affects about $179 million in debt.

The rating on the hospital bonds issued by the Delaware County Authority dropped to "BBB-" from "BBB."

Crozer-Keystone Health System's debt is secured by revenue from its hospitals: Crozer-Chester Medical Center, which is named on the bonds, plus Delaware County Memorial, Taylor, Springfield and Community Hospitals, said Liz Sweeney, health-care analyst for Standard & Poor's.

She said Crozer had "always been the dominant provider in Delaware County, but our concern is that dominance isn't getting them enough sort of financial stability." She said the system, which is facing strong competition from the University of Pennsylvania Health System and Main Line Health, needed a bigger cushion.

Crozer reported a $1.8 million operating loss for fiscal 2007 on revenue of $853 million, and a $2.8 million operating loss for the first quarter of fiscal 2008, when total revenue was $210 million, Sweeney said. The credit-rating company said hospital management blamed the "sub-par performance" on a rapid drop in patient length of stay and an inability to reduce staffing levels quickly. The hospital also said it had more bad debt and higher employee-health-coverage costs.

Crozer spokeswoman Kathy Scullin said the lowered bond rating was "indicative of the very tough environment that the hospitals operate in." The hospitals announced a reorganization of outpatient, psychiatry and rehabilitation services last month, she said. Because employees can retrain for open positions in other departments, it is too early to tell how many jobs will be lost, Scullin said.

Those changes should put the hospitals back in the black, Sweeney said, but "long term, they need to do more than that."