Is Dimensions Health Corp.--the company that runs Prince George's Hospital Center, Bowie Health Center and Laurel Regional Hospital--healthy?
Two bond-rating firms have rendered a guarded prognosis in the last month, both lowering the corporation's ratings even as the nonprofit seeks a transfusion of wealth to fortify its market position.
"Don't write the obit for Dimensions. We're still very strong," asserted Winfield M. Kelly Jr., Dimensions president who seven weeks ago asked several potential partners in the health care field to submit merger, consolidation or buyout offers.
Indeed, Dimensions has maintained its leading 24 percent market share in the Washington-Baltimore region, against 10 other hospitals.
"We're just making the choice to find a partner now, on our nickel, on our dime," Kelly said. "The pressure is on hospitals. Competition for market share is going to intensify, and I want to be ahead of the curve."
Dimensions' bid for potential partners came just before the company's bonds were downgraded one notch from A3 to Baa1 on May 27 by Moody's Investors Service, and two notches from A- to BBB on June 2 by Fitch International Bank Credit Analysis. A lower rating makes it more expensive for companies to borrow.
"Unfortunately for Dimensions, they waited a little too long to get their RFP [request for proposals] out," said Michael Mastej, development director of Universal Health Services, a national for-profit chain that owns 80 percent of George Washington University Hospital and has been aggressively seeking other investments in the region.
Despite Dimensions' problems, Mastej said Universal is interested in the company and has submitted an offer he declined to disclose. "We think there's lot of merit," he said. "It's a fine system. It has some outstanding facilities and a lot of talent."
Johns Hopkins Hospital also received the proposal but declined to say whether it would respond to Dimensions. In a complicated deal also aimed at shoring up its competitive position, Hopkins absorbed Howard County General last year. Providence Hospital in the District declined to make a bid to Dimensions.
Dimensions, which has 2,700 employees, has had three years of declining profits, culminating in a $9 million loss for this fiscal year, which ends June 30. For fiscal 2000, Dimensions is projecting a profit of $1 million on revenue of $255 million.
The company's cash on hand has dropped in two years from 104 days of operating funds to 66 days now, while companies owing Dimensions are slower to pay, taking 84 days compared with 58 days two years ago.
Dimensions was incorporated in 1986 to operate Prince George's County's two public hospitals and one public clinic, while the county still owns the buildings and issues the bonds. Its largest facility, Prince George's Hospital Center in Cheverly, has undergone significant improvements even as its finances have worsened.
"We still have a very significant balance sheet," said Kelly, a former Prince George's county executive. "It's just that pressures are getting tougher and tougher."
Moody's agreed with Kelly that Dimensions is at least in part a victim of circumstances beyond its control. For one thing, the company operates in a state that regulates hospital rates and is near the District, which does not.
In 1998, Moody's said, Dimensions "lost a large portion of its outpatient surgery volume" in its hospitals to freestanding unregulated facilities in Maryland and the District that are able to negotiate more competitive rates with insurance companies.
"At the moment, sitting on the District line, the services we provide are constantly being cherry-picked by stand-alone medical facilities," Kelly said.
Besides that, while hospitals in rural regions of the state enjoy a near monopoly, the competition in the Washington-Baltimore region is intense.
"Our long-term prognosis is negative for urban hospitals, particularly those in the Baltimore-Washington corridor, which will suffer from intense competition, overcapacity and an exceptionally high dependence on Medicaid payments that continue to face cutbacks," Moody's said in a report in April.
Even as Dimensions' problems have been deepening, Moody's said, the Maryland Health Services Cost Review Commission imposed a 1 percent rate reduction this spring on all hospitals in the state, resulting in lower revenue.
Unable to retain technical employees who can make more working for computer firms, Dimensions has had to contract out for its information technology systems. It also incurred higher costs for agency nurses due to "hiring difficulty resulting from protracted union negotiations and a need for increased staff in the emergency room" at the Cheverly hospital.
Those myriad problems are what gives Moody's pause. "Management needs to demonstrate that it has stabilized the system's operating performance, while shoring up the balance sheet, before we consider placing a stable outlook at the Baa1 rating level," Moody's said.
Despite such stern words, Kelly remains upbeat. Even the lower rating, he said, is "still very solid. Everything is going along very, very well." The request for partners, meanwhile, has yielded several "positive responses," he said.
Universal's Mastej is waiting to hear. Dimensions, he said, is "geographically located in proximity to our facility at George Washington. The state of Maryland has its drawbacks. But even so, we feel there's still some interest and we'd like to explore that with them, and we hope to do so. As they say, the ball's in their court."
CAPTION: "We're still very strong," said Winfield M. Kelly Jr., president of Dimensions Health Corp. He has asked potential partners in the health care field to submit merger or other offers.