Byline: Michele Conklin News Staff Writer
PorterCare Adventist Health System, owner of three hospitals in the metro area, has lost its investment grade rating due to its involvement in financially struggling Centura Health.
Centura, the state's largest hospital system, is a joint management company formed in 1995 between PorterCare and the Sisters of Charity Health Services, now part of Catholic Health Initiatives. Centura manages PorterCare's Porter, Littleton and Avista hospitals.
After losing $8.2 million in the fiscal year ended June 30, Centura has lost $18 million in the first eight months of the current year. In addition, one-time losses from managed-care contracts, uncollectible accounts and a loan guarantee to Precedent Health Center could overshadow that amount, according to a report issued Monday by Standard & Poor's.
``It's going to be a pretty bad year,'' said Martin Arrick, a director in the New York office of Standard & Poor's. ``They have all this stuff happening at one time and they're going to take a huge hit this year. How much damage to the balance sheet is short term vs. long term is not clear. What is clear is they're having a lot of losses.''
The rating agency downgraded PorterCare from a triple-B rating to a double-B minus, a non-investment grade rating. It also has the organization on Credit Watch with negative implications, which means it could further lower the rating in coming months.
Catholic Health Initiatives, a national organization that is far less dependent on the Centura joint venture, has maintained its double-A rating.
Centura officials admit the organization is struggling but say efforts are under way to turn the situation around. Centura executives expect to have a plan in place by next month. They are looking at everything that will increase revenues and reduce costs, said Chief Executive Joe Swedish.
``A lot is just basic blocking and tackling,'' Swedish said. ``We cannot point to one issue over another. It's a combination of issues. All of them together created an operational performance that needs to be corrected and it will be corrected.''
Some of the steps that may be taken, according to a financial disclosure made to bondholders on April 28, include:
* Reducing the number of managed-care contracts that put Centura at financial risk when demand for hospital services increases.
* Staff reductions at Penrose-St. Francis Hospitals in Colorado Springs and St. Mary-Corwin Medical Center in Pueblo. Several hundred positions have been eliminated, primarily through attrition, Swedish said. No patient care positions were eliminated.
* Restructuring or closing the Centura Senior Life Center in Denver within six months. Closing the facility, which includes long-term care and nursing home units, is a remote option, Swedish said. It is more likely that the services will be restructured.
Centura's chief competitor, Columbia / HealthOne, anticipates much better news. That system, which owns five metro-area hospitals, expects to report a profit for 1998 after reporting a $46 million loss the year before.
``I would describe 1998 as a turnaround year for HealthOne,'' said Maureen Tarrant, vice president of strategic and administrative services.
