Bond Ratings Reflect Battle of Conway Hospitals

Bond Ratings Reflect Battle of Conway Hospitals

There were no blaring headlines, but two recent shifts in bond ratings offer a glimpse into how the hospital competition is playing out in Conway between Baptist Health and Conway Regional Health System.

Bottom line? Baptist has some setbacks to overcome.

S&P Global Ratings in late March revised Baptist Health’s bond outlook from “stable” to “negative” while doing the opposite for bonds issued on behalf of Conway Regional for its hospital, Conway Regional Medical Center. Both of the companies’ long-term ratings were affirmed, A+ for Baptist and BBB+ for Conway Regional, but the ratings agency found that Baptist’s “largest obstacle to profitability” continues to be Baptist Health Medical Center-Conway, a 111-bed, $150 million hospital launched as a rival to Conway Regional in September 2016.

And while S&P Global praised Baptist’s overall strong business position as the state’s largest health care system, it also noted that the nonprofit’s performance had “deviated from projections provided by management at last review,” most notably in the form of a $30 million operating loss.

“From 2016 to 2017, operating losses attributable to Baptist Conway grew to $31.6 million from $24 million,” the S&P Global report said.

Meanwhile, the rater’s separate assessment of bonds issued on behalf of Conway Regional “reflects our belief that the organization has been able to weather the competitive pressures” from its new rival. “While volumes decreased from 2016 to 2017 after the opening of the hospital, year-to-date 2018 volumes are not trending to show any further decline.” S&P Global said Conway Regional’s “focus on aligning with area physicians and improving geographic reach will help mitigate any stresses, and even allow CRMC to grow over the next few years.”