Fitch Ratings has affirmed the 'BBB' underlying rating on approximately $31.7 million hospital revenue bonds, series 1998 and 2004 issued on behalf of Knox Community Hospital (Knox) by Knox County, Ohio. The series 2004 bonds are backed by an irrevocable direct pay letter of credit (LOC) from National City Bank, which Fitch was not asked to rate. The Rating Outlook is Stable.
The rating affirmation at 'BBB' reflects Knox's strong market position as the sole community provider in the service area, solid operating profitability bolstered by growing patient utilization, sound liquidity and management contract with Quorum Health Resources. As the only hospital within a 25-mile radius, Knox faces limited competition in its service area and had a leading market share of 48.7% in 2006. Knox's operating performance has been very strong with an operating margin of 4.8% (operating income of $4.0 million) in 2007. Supporting the robust operations is utilization growth, particularly in outpatient services, with outpatient surgeries growing by 12.8% in fiscal 2007 to 3,097 cases from 2,746 in prior year. Knox's liquidity metrics compare well to Fitch's 'BBB' category medians with days cash on hand at 138.6 as of Dec. 31, 2007 compared to the median of 120.3 days.
