Talks could aid bond rating

Forum's new BB bond rating is speculative and essentially junk-bond status.
By WILLIAM K. ALCORN
VINDICATOR STAFF WRITER
YOUNGSTOWN -- Contract talks that could ultimately improve Forum Health's sagging bond rating have begun between the hospital system and labor unions that represent registered nurses and service employees at Forum's Western Reserve Health System.
In a report issued Tuesday, Standard & amp; Poor's downgraded Forum Health from BBB-, the lowest investment category, to BB, which is "no longer reflective of an investment-grade rating level."
The BB rating is speculative and essentially junk-bond status, an S & amp;P spokesman said. The lower rating makes it more expensive for Forum to borrow money, the S & amp;P spokesman said.
S & amp;P, a Wall Street investment rating firm, says Forum's deteriorated financial profile is due to several factors, including higher-than-average employee wages and benefits.
As a result, S & amp;P says renegotiating contracts with organized labor is "key" to the financial turnaround and long-term stability of the hospital system.
That process has already begun.
Contract changes OK'd
At the end of October 2006, members of three unions representing 1,200 employees of Forum Health Trumbull Memorial Hospital in Warren and Hillside Rehabilitation Hospital in Howland approved contract modifications union leaders said would provide financial relief to the hospital and help union members keep their jobs.
Among other things, members of Locals 2804, 2288 and 2026 of American Federation of State, County and Municipal Employees/United Nurses of America accepted concessions including a wage freeze, a freeze on pensions in exchange for a 401(k) retirement plan, and a co-pay on health insurance premiums.
On Wednesday, the Youngstown General Duty Nurse Association and Forum agreed to guidelines for early negotiations, said Eric Williams, YGDNA president. He expects talks to begin at the end of January or early in February.
The YGDNA represents about 650 registered nurses at Northside Medical Center, Tod Children's Hospital and Beeghly Medical Center. YGDNA's contract with Forum is scheduled to expire in July, Williams said.
"We're not immune to Forum's financial needs and we're making an effort to reach an early tentative agreement ... so Forum can demonstrate cost restraints to its creditors," Williams said.
"We'll make every effort to help this community hospital stay here," he said.
Rejects blame on unions
However, Williams said the inference that the unions are somehow to blame for Forum's financial condition is inaccurate.
"As far as the registered nurses are concerned, we've dared them to compare our wages and benefits with others in the area. Our wages and benefits are competitive," he said.
Likewise, Dave Regan, president of District 1199 of the Service Employees International Union, said the wages and benefits of the 1,400 Forum employees he represents are competitive with others in the area. There is a whole set of reasons that explain Forum's financial situation, Regan said.
He said District 1199 has already begun contract negotiations with Forum, with two meetings before Christmas and another scheduled for Jan. 22. District 1199's contract expires March 31.
"We are going to negotiate a new agreement. The S & amp;P report is just one factor of a much larger picture, and one that was expected by both the union and Forum," he said.
Dr. Keith Ghezzi, interim chief executive officer and president of Forum Health, said in this week's Forum Flash that S & amp;P's report "credits our aggressive turnaround program" that includes 55 million in revenue and cost-savings initiatives.
But, the S & amp;P report also says that while the turnaround plan is being implemented, the ultimate success and sustainability of improved results still need to be demonstrated.
Other factors
Additional factors affecting Forum's credit and its ability to sustain the improved results include heavy local competition from Humility of Mary Health Partners, the continued negative operating performance through the 11 months ending Nov. 30, 2006, and financial covenant violations requiring waivers and forbearance agreements with creditors.
In the Forum Flash, the company newsletter, Dr. Ghezzi said Forum is continuing to work closely with the company's lenders to ensure the financial flexibility needed to go forward with the turnaround effort.
Also, he said "we look forward to constructive talks" with the Ohio Nurse Association's YGDNA and the SEIU, District 1199. The unions represent employees at Northside Medical Center.
Moody's Investors Service, another Wall Street investment rating firm, said that Forum Health's B1 bond rating remains on the watch list for potential downgrade until a review of the rating is completed in early February. The watch list status reflects the system's significant ongoing challenges in executing a successful turnaround, and the resulting volatility of the overall credit position, a Moody's statement said.
Forum Health has about 180 million in outstanding rated debt, Moody's said.
Deny purchase rumor
In the meantime, spokeswomen for Forum and HMHP say there is no truth to a rumor that HMHP and Akron Children's Hospital, who have a partnership arrangement, have bought or will buy Tod Children's Hospital.
HMHP has no plans to buy Tod. However, there have been conversations regarding how HMHP and Forum can work together to provide pediatric hospital services for the benefit of the community, a Humility of Mary spokeswoman said.
A Forum spokeswoman said there have been several general discussions with Akron Children's Hospital and HMHP and others about potential scenarios regarding Tod. However, there is no sale, she said.