CARTI’s financial pain continues. Last week, Fitch Ratings Inc. of Chicago downgraded CARTI’s bond rating from BBB-, which was the lowest investment-grade rating, to BB+. A BB rating indicates, according to Fitch’s website, an “elevated vulnerability to default risk … however, business or financial flexibility exists that supports the servicing of financial commitments.”
The Little Rock cancer treatment organization’s unaudited financial report shows an operating loss, before depreciation, of $5.8 million for the fiscal year that ended June 30. It had budgeted a $3.1 million operating income before depreciation. In fiscal 2016, CARTI had an operating loss of $7.9 million before depreciation.
Fitch said the loss was caused by several factors, including patient volume volatility and added expenses tied to cancer treatments. Oncology drugs cost CARTI $95.9 million in fiscal 2017, up from $87.7 million the previous year.
Still, CARTI’s net patient revenue was $171.3 million for the 2017 fiscal year, $3.1 million more than budgeted and $14.1 million more than in fiscal 2016.
Fitch said in its release that the downgrade “reflects CARTI’s consecutive years of missed operating targets.”
If you recall, the nonprofit failed to maintain the required coverage ratio on the $49 million bond issue that was used to build a four-story center that opened in November 2015. CARTI was forced to hire the management consultant Berkeley Research Group of Emeryville, California.
Adam Head, CARTI’s new president and CEO, said in an email to Whispers that CARTI was disappointed to learn about the downgrade.
“But I am encouraged by the progress the organization has made over the past six months,” said Head, whose first day at CARTI was Sept. 5.
“In my first week at CARTI, I have been so impressed by the commitment of the physicians and team,” he said. “Despite the present challenges that exist, the team is wholeheartedly dedicated to ensuring CARTI can continue to fulfill our mission of caring for our cancer patients.”
Fitch noted that on a quarter by quarter basis, CARTI’s financial performance has improved, “lending solid credence … that further improvements can be expected during fiscal 2018 and beyond as CARTI sees full year results of their efforts.”
For its current fiscal year, CARTI expects to exceed its coverage ratio, Fitch said.
“CARTI management describes the 2018 budget as very conservative, although the organization has a history of missed budgets,” Fitch wrote.
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