Moody’s revised Fort Wayne, Ind.-based Parkview Health’s outlook to negative from stable Oct. 16, citing a sharp rise in leverage from a planned $550 million bond issue and execution risk tied to several growth initiatives, including the system’s pending acquisition of Brentwood, Tenn.-based Ovation Healthcare.
Parkview on Oct. 16 announced it signed an agreement to acquire Ovation, a shared services company that works with more than 500 healthcare organizations across 48 states. Parkview framed the deal as a way to help rural hospitals remain independent and preserve local access to care.
Parkview will contribute its own administrative and operational capabilities, including revenue cycle and information services, to Ovation’s platform. After closing, the combined operations will carry the Ovation Healthcare name. Parkview will own Ovation, which will operate as a separate healthcare services organization with its own board.
Moody’s said that while the deal has the potential to diversify Parkview’s revenues and strengthen the system over time, “realizing its expected benefits will require successful integration and execution amid an already elevated level of capital spending and organizational growth.”
Moody’s affirmed Parkview’s “A1” rating. The agency said that after the proposed bond financing, Parkview’s adjusted debt to adjusted cash flow is expected to near 5x, and cash to adjusted debt will drop to about 150%. Moody’s called both metrics weak for the rating.
The Ovation deal is expected to close in the coming weeks, following regulatory review.
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