SAN FRANCISCO - (Business Wire) Fitch Ratings has affirmed the 'BBB-' rating on approximately $2,410,000 outstanding certificates of participation (COPs) evidencing proportionate Interests of the Holders Thereof in Installment Payments to be paid by the Palomar Pomerado Health System (a California Local Health Care District) from Purchase Payments to be received from Indian Health Council, Inc. (IHC). The Rating Outlook is Stable. The 'BBB-' rating affirmation and Stable Outlook are primarily supported by the lock-box mechanism that ensures federal appropriations flow directly from the federal government to the trustee to be held for debt service before IHC receives the remainder, effectively ensuring that the certificate holders are paid before any other debt obligation. Also supporting the rating and Stable Outlook is IHC's essentiality of services and adequate liquidity. IHC is the only provider of healthcare services in a vast geographic region in San Diego County, California servicing roughly 15,000 clients.
IHC's fiscal 2008 days cash on hand and cash-to-debt metrics of 106.5 days and 90.3% compare well to Fitch's 'BBB' ratios of 114 days and 62.6%, respectively. Through the nine-month interim period, ending Sept. 30, 2009, IHC reported a loss of $176,000, and had $4 million in unrestricted cash and investments, equating to 93.4 days-cash-on-hand.
Concerns include IHC's small revenue base ($14.3 million in fiscal 2008), historic losses from operations, and reliance on a single source of funding. IHC relies heavily on annual Indian Health Services (IHS) payments which are based partly on the total population served, the scope of services provided, and the previous year's allocated dollar amount. Fitch believes that the possibility of a cut in the IHS payments is very remote given the program's history plus the stable trends in IHC's patient volume and the service area population trends.
IHC owns and operates community clinics that provide primary health care services, dentistry, and behavioral health to Native American reservations in San Diego County, CA.
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Fitch Ratings
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