Fitch Ratings-New York-09 May 2013: Fitch Ratings has placed the following bonds issued by
Marion County Hospital District on behalf of Munroe Regional Health System (MRHS) on Rating
--$60.2 million series 2007 'A-'.
The bonds are secured by MRHS' gross revenues.
KEY RATING DRIVERS
RATING WATCH EVOLVING: The Rating Watch Evolving reflects the ongoing negotiations
between MRHS and Health Management Associates (HMA; rated 'BB-'/Outlook Stable by Fitch) to
become a part of HMA. If the transaction is completed, HMA is expected to provide sizable capital
investment in MRHS, and all of MRHS' outstanding debt will be retired prior to or at closing.
MRHS expects to sign a letter of intent (LOI) and expects to finalize the transaction within the next
DECLINE IN OPERATING PROFITABILITY: In fiscal 2012 (Sept. 30; audited) MRHS recorded
a $4.8 million operating loss, which resulted in a negative 1.7% operating margin and 5% operating
EBITDA margin. This is down from fiscal 2011's 1.5% operating margin and 7.9% operating
EBITDA margin and compares negatively against Fitch's 'A' category medians. Management
attributes the profitability decline to softened volumes coupled with higher observation stays,
increased amount of Medicare paying patients accessing the facility, and state Medicaid
LEADING MARKET POSITION: MRHS has the leading market position in its primary service
area of approximately 55%. Fitch views MRHS' leading market share as a primary credit strength.
STABLE LIQUIDITY POSITION: Six-months through fiscal 2013 (March 31, 2013; unaudited)
MRHS had unrestricted cash and investments totaling $122.2 million, which equated to 152 days
cash on hand, 19.1x cushion ratio, and 145% cash to debt. These metrics are relatively stable from
the prior year and remain adequate for the rating level.
POTENTIAL RATING MOVEMENT: Based upon the final outcome of the proposed transaction
between MRHS and HMA, the rating could be raised, affirmed, or lowered. Fitch would view
positively the completed affiliation between MRHS and HMA as an overall enhancement to the
credit profile of MRHS. However, continued losses from operations and mounting capital funding
needs could lead to negative rating pressure over the medium term.
Munroe Regional Health System's primary business is the operation of a 421-bed acute care
hospital in Ocala, Florida, which is located approximately 72 miles northwest of Orlando. MRHS
currently leases the hospital from Marion County Hospital District, but does not receive any tax
revenues to support operations. However, management intends to cancel lease upon signing a
definitive agreement with HMA. In fiscal 2012, MRHS had total revenues of approximately $294.1
For more information, please see 'Fitch Affirms Munroe Regional Health System's (FL) Revs at
'A-'; Outlook Stable, dated May 11, 2011.
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email:
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Revenue-Supported Rating Criteria' (June 12, 2012);
--'Nonprofit Hospitals and Health Systems Rating Criteria' (July 23, 2012).
For information on Build America Bonds, visit 'www.fitchratings.com/BABs'.
Applicable Criteria and Related Research
Revenue-Supported Rating Criteria
Nonprofit Hospitals and Health Systems Rating Criteria
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND
DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY
FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION,
ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED
RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT
ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF
INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES
AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION
OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO
THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE
FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED
ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE