LOS ANGELES - The Summit Medical Center in Oakland, Calif., last week settled an employee strike that harmed the hospital's financial standing and generated credit rating concerns.
Standard & Poor's Corp, this month placed the medical center's bonds on CreditWatch with negative implications. The alert, affecting a BBB-plus rating on $57 million of revenue bonds issued in 1989 and 1985, reflects "operating and financial pressures resulting from a protracted strike, and the threat it poses to the implementation of a sound financial plan," the rating agency said.
Late last week, employees ended the six-week strike after the medical center agreed to honor sympathy strikes among various unions at the hospital.
Standards & Poor's said it must study the strike's impact and assess the center's progress after its recent merger with another hospital before making a final rating determination.
"We have to get additional information" about the strike's financial effects and evaluate the fallout for the current fiscal year before making any decisions, said Elissa Granick, the Standard & Poor's analyst monitoring developments at Summit.
The strike, involving about half the hospital's labor force, "is expected to result in a substantial loss for June due to the use of more costly temporary personnel and lower patient volumes," Standard & Poor's noted recently.
The medical center's continuing financial pressures also prompted Moody's Investors Service this week to lower its rating on Summit's revenue bonds to Ba from Baa. Moody's noted that the medical center had experienced increasing operating losses for the last three years.
Summit's merger this year with nearby Providence Hospital eliminated a competitor and provided a financial cushion. Moody's said, but "uncertainty continues to exist" because of the strike and the hospital's substantial provision of indigent care.
Prior to the merger, Summit was known as the Merritt Peralta Medical Center. The post-merger corporation began operations on March 1, 1992. The merger eventually is expected to produce operating efficiencies, Standard & Poor's noted, but initial results have been "materially below projections."