Auditor says Lawrence Memorial Hospital's credit rating upgrade extraordinary for its size, economy

Lawrence Memorial Hospital, 325 Maine.

Lawrence Memorial Hospital, 325 Maine.

Lawrence Memorial Hospital’s financial status is on the rise.

Moody’s Investors Service, one of the country’s top credit-rating agencies, has upgraded its long-term bond rating to A1 from A2. LMH is among the smallest hospitals in the country to receive such a rating.

LMH’s operating revenue was $185 million last year, while most A1-rated hospitals have $790 million, according to Moody’s report.

In issuing the upgrade, Moody’s noted LMH’s strengths are its dominant market position in a favorable service area and a track record of strong operating results with 12 years of increasing cash flow growth.

“It was a total shock to everybody. We didn’t lobby for it. We didn’t expect it, but it’s a terrific accomplishment,” said Chuck Heath, LMH board treasurer. “Moody’s always told us that A1 probably is not going to happen for LMH because of the size, but the numbers and the accomplishments were too good for them to ignore, so hats off to everyone.”

The hospital received its last Moody’s upgrade in 2010, when it went from A3 to A2.

LMH received a glowing 2011 audit report Wednesday from Angela Miratsky, a partner with the Kansas City, Mo.-based accounting firm BKD, during the board meeting.

“To get an upgrade in this economy is pretty impressive,” Miratsky said. “I think the higher rating just demonstrates the financial stability of the hospital and that they’ve done a good job over the years of making sure they are financially sound and will be here for years to come.”

In 2011, its operating income was $9.5 million, up 9.3 percent from 2010. It was a significant turnaround from 2010, when LMH ended the year with a 9.2 decrease compared with 2009.

LMH’s 2011 bottom line received a boost by a $1.6 million incentive payment from the Centers for Medicare and Medicaid Services for meeting national information technology standards and from additional revenue generated by the midyear affiliation of the Internal Medicine Group practice.

Physician service revenue increased 39 percent in 2011 because of the addition and growth in services provided for cardiology, neurology, obstetrics and gynecology, and by the hospitalist physician group.

As a nonprofit, LMH reinvests its profits to finance facility improvements, purchase new equipment and provide additional services.

During the past five years, LMH has had $115 million in capital asset additions, including $13.9 million last year. Among last year’s projects were renovation of its kitchen and cafeteria, expansion of its laboratory services, technology for electronic health records at its affiliated practices and a new medical building in Eudora.

Miratsky said more hospitals are receiving credit rating downgrades than upgrades in this economy.

“I think LMH has done a good job with strategic planning and some of the actions that they’ve taken over the years to position themselves. Management has done a good job of monitoring expenditures and really watching the financials,” she said.

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