AUGUSTA — A second agency has lowered its credit rating of MaineGeneral Medical Center, after the hospital’s parent organization saw its ability to accept new patients hindered by the loss of several primary care doctors last year.

The recent credit downgrade came from Moody’s Investor’s Service, one of two firms that monitors the organization’s finances after it built a new hospital in north Augusta five years ago with bond funding. Another agency, Fitch Ratings, made a similar downgrade last spring.

In part because those primary care doctors departed, MaineGeneral’s parent organization took a $22.9 million operating loss last fiscal year. It also took a roughly $2.9 million loss in the first quarter of this year, which began in July.

Now, hospital executives say they’re taking steps to improve MaineGeneral’s finances, such as recruiting new primary care providers and making changes that will appeal to existing providers. They say the downgrade itself shouldn’t affect the health system, as it’s not planning any large capital projects in the near future.

MaineGeneral’s chief financial office, Terry Brann, said in an interview that the losses in the first half of this year can be made up for in the second half, which is typically a busier time of year. He also said that the losses this year are $2 million lower than they were at the same point last year.

“The gist of it is, in your typical year, you’ll lose in the beginning and then gain in the end,” said Chuck Hays, chief executive officer and president of MaineGeneral Health, during the interview. “Volume picks up during flu season.”

Still, those downward bond ratings and revenue figures hint at the financial struggles facing the 192-bed flagship hospital, which opened about four years ago, and the network of health centers that are connected to it.

When Moody’s announced the credit downgrade in October, it pointed to several challenges MaineGeneral faced last year, including the loss of primary care doctors, the resulting decline in patient visits.

The departure of nine primary care providers in the last two years meant that fewer patients were able to enter the health care system, leading to less overall revenue in 2017, as well as extra costs for recruitment and contracting temporary providers, Hays said last summer.

Now, MaineGeneral Health has managed to fill six of those vacancies and is still trying to recruit for the other three, Hays said.

Primary care physicians have complained about the growing amounts of documentation that insurance providers require to be filled out, which can distract from their clinical work, Hays has said. So MaineGeneral is also redesigning its primary care services, hiring more medical assistants who can fill out paperwork and electronic records and leave the clinical work to physicians and nurses.

The changes are starting to have a positive effect, with many providers now able to accept new patients and a 2 percent increase in the number of new patients who have entered the system so far this year, according to Hays.

“I think we have a good plan” for the year ahead, Hays said, mentioning positive ratings the hospital has received for its overall quality of care.

But he added a note of caution about state and federal changes to MaineCare — the state’s name for Medicaid — and Medicare, such as a reduction in the amount Medicare will reimburse for drugs that’s taking effect soon.

Maine residents also voted to expand MaineCare eligibility in November. If the expansion is implemented, it would help hospitals pay for their care of the uninsured.

“We have not banked on it, but that would be a huge plus,” Hays said.

In its credit downgrade announcement, Moody’s also pointed to a switch to a new billing vendor, an increase in the so-called “bad debt” from patients who can’t afford out-of-pocket medical costs, and the large proportion of revenue MaineGeneral receives from two government programs, Medicaid and Medicare.

Across Maine, MaineCare reimburses just 73 percent of costs, down from 77 percent five years earlier, according to Hays.

“You’re losing more money” with those rates, Hays said.

Moody’s also described past financial struggles the organization has faced, including the departure of several surgeons in fiscal year 2015, which affected the number of patients in the system. And it noted the shrinking, aging population of the Kennebec Valley, which could reduce the volume of patients coming to MaineGeneral overtime.

Because of MaineGeneral’s weak cash flow and large proportion of debt in 2017, analysts from Moody’s downgraded its credit rating by one level, from Ba2 to Ba3.

Both ratings are considered non-investment grade, also known as junk bond status, and suggest substantial credit risk. But the current rating is two rungs below investment grade, which investors see as more stable.

In their reports, both Moody’s and Fitch Ratings noted steps MaineGeneral is taking to improve its performance and said there’s a “stable” outlook for the hospital’s ability to pay back its debts.

A Moody’s representative couldn’t be reached for comment.

An analyst from Fitch Ratings, Paul Rizzo, said the short-term effects of the ratings changes are minimal, but he warned that further losses could affect the hospital’s ability to make investments down the road, by increasing interest rates.

“The only thing the downgrade means to them right now is, if they want to issue additional debt, the cost of debt will be more expensive,” Rizzo said. “It doesn’t impact them from an operational perspective.”

Rizzo expressed confidence that MaineGeneral could stabilize its finances, but added that more downgrades could be possible if the hospital fails to meet debt and cash flow targets.

Hays, the CEO, said that MaineGeneral intends to meet the requirements, or covenants, of the bonds that were issued for the construction of the new hospital.

The $312 million project consolidated the services of several older institutions into the new hospital complex in north Augusta, which opened in November 2013.

“We’ve never not met the covenants, nor do we have plans to not meet them,” Hays said. “We’re pretty focused on those.”

One of those covenants stipulates that MaineGeneral must keep at least 75 days worth of operating cash on hand. In each of the last four years, the hospital had between 79 and 84 days of cash on hand, according to the Moody’s report.

Those levels were markedly down from the 107 days of cash MaineGeneral had in 2013, but the organization anticipated losses in the first two years after the move to the new hospital, Hays said. He also said that number can be influenced by investments in the stock market, in addition to regular operations.

“We expect that (number of days cash on hand) to improve,” Brann said.

Now, the health system is trying to address challenges that weren’t anticipated during the move to the new hospital. The hospital did end 2016 in the black, with a $1 million operating margin. But a year later, it took the $22.9 million loss, according to audited financial statements.

Charles Eichacker — 621-5642

[email protected]

Twitter: @ceichacker

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