Moody's affirmed the ratings on Quorum Health Corp., reflecting the agency's view that the company's earnings will strengthen over the next year.
Quorum's B3 corporate family rating and B3-PD probability of default rating were affirmed, while the outlook was revised to negative from stable.
The rating agency believes Quorum could improve its earnings by successfully executing both divestiture efforts and plans to enhance its revenue cycle management.
Moody's said the negative outlook reflects the execution risk linked with transitioning revenue cycle management functions to a new provider and divesting underperforming hospitals.
The Brentwood, Tenn.-based hospital operator's B3 corporate family rating will continue to be constrained by very high financial leverage and high interest costs which severely constrain cash flow. The rating is also stifled by the concentration of profits in a few markets and growing refinancing risk, among others.
The speculative grade liquidity rating of SGL-3 on Quorum remains unchanged. This reflects the company's low cash balances and weak cushion under the financial covenant governing its credit agreement which limits access to its revolving credit facility.
Moody's said Quorum's ratings could be downgraded if it fails to show a significant boost in earnings over the next several quarters, or if liquidity does not improve from current levels.
