Lakewood bond analyst offers the following take on Centegra’s desired affiliation with Northwestern Memorial Healthcare (joint press release here.)
Centegra built a big new hospital in Huntley in order to stave off competition from Mercy Hospital.
But building more beds doesn’t increase demand for medical services.
In fact, with a falling population, demand is decreasing.
Currently Centegra has 341 beds licensed.
It’s staffing 264, down from 308 in 2013.
Expect more cuts at the Woodstock hospital.
In FY2011, Centegra had 63,000 acute patient days.
In calendar 2015, they had 48,400, down 23% in four years.
And this is BEFORE they open their new hospital.
Expect acute patient days to go up modestly but system-wide occupancy to drop sharply from the current 65% of staffed beds.
Centegra’s margins, cash ratios and debt service coverage — common metrics for assessing hospital creditworthiness — are all weak and about to get weaker when they have to staff the Huntley facility.
Of course they’re seeking to be acquired by a stronger hospital.
The same thing happened in Elgin.
Sherman built that big, fancy, expensive new hospital, raising their costs.
But demand didn’t go up simply because they built a new hospital.
A year later they were desperately seeking a white knight to buy them.
[Advocate Health System acquired Sherman.]
We’re probably looking at the end of an independent hospital in McHenry County.
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