Two months after a bond rating service downgraded Eastern Maine Healthcare System to junk bond status, a different service said the system has adequate financial protection.

On Tuesday, Standard & Poor’s reaffirmed its BBB long-term rating for EMHS, which indicates the system can meet its financial obligations. However, S&P also adjusted its outlook from stable to negative, citing operating performances at some EMHS member hospitals, including its flagship, Eastern Maine Medical Center, according S&P’s report.

EMHS is the umbrella organization under which nine hospitals operate, including Acadia, Blue Hill Memorial, Mercy, Inland and The Aroostook Medical Center.

S&P did credit the system for positive operating and net earnings, which was attributable, in part, to increased revenue from the system’s investment portfolio and prior year settlements under MaineCare, the state’s version of Medicaid. But it warned that five of the nine hospitals are underperforming, and that an expansion of EMMC could make things worse.

“We also expect further operating and financial pressure at EMMC with the fall opening of its phase two expansion,” said the report. “We believe if EMHS cannot improve and stabilize performance and cash flow at its individual hospitals, a downgrade would be warranted.”

Mercy, which intends to consolidate its facilities at its Fore River campus, said EMHS’ bond ratings have no impact on the Portland hospital since it does not intend to go to bond markets in the near future to finance its upcoming consolidation.

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“We will file a letter of intent later this year with the state, and the project team is now working on site development, soil testing, space planning, regulatory requirements and potential traffic impacts,” said spokesman Ed Gilman in a statement.

“We continue to focus on delivering high quality care to the people of Maine, while meeting or exceeding our financial targets.”

Tony Filer, EMHS senior vice president and chief financial officer, said in an EMHS release that bond markets are based on past performance and not an assessment of current or future performance.

In June, Moody’s Investor Services downgraded EMHS credit rating to Ba1, with a negative outlook, a rating below investment grades and commonly referred to as junk status.

Filer said he looks forward to demonstrating that S&P’s negative outlook is not warranted.

“While these continue to be challenging times for health care providers in Maine and throughout our nation, EMHS has a proactive five-year strategy that is both innovative and forward-thinking,” he said. “We are building an enterprise-wide electronic health records system, organizing our more than 1,000 employed providers into a single medical group, and continuing to advance our very successful population health model.”


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