A national credit rating service has improved its opinion of the likely direction of Whidbey Island Hospital District’s financial future.

On Feb. 17, Moody’s Investors Service reported that the outlook for the public hospital district, commonly known as WhidbeyHealth, has been revised to stable from negative. The outlook indicates a low likelihood of credit rating changes in the near future.

“The revision of the outlook to stable reflects WhidbeyHealth’s successful negotiation of long-term financing to avoid default on a privately-owned BAN (bond anticipation note),” Moody’s reported. “The stable outlook additionally reflects WhidbeyHealth’s improved liquidity position and cash flow in 2022, supported by the working capital loans, which will help stabilize the district’s finances over the outlook period.”

Still, Moody’s affirmed WhidbeyHealth’s general obligation unlimited tax bonds at Ba3, affecting about $44.9 million. At the same time, Moody’s has affirmed the B3 rating on the hospital’s general obligation limited tax bonds, affecting approximately $12.3 million.

According to Moody’s, Ba3 and B3 are non-investment grade ratings. A Ba3 rating is judged to have “speculative elements” and is “subject to substantial credit risk.” A B3 rating is considered to be riskier and speculative.

Moody’s noted the district’s “still precarious liquidity position and long-term prospects.” The company reported that the district’s days of cash-on-hand and operating margins remain thin and susceptible “to even a minor financial disruption.”

Thursday morning, a hospital spokesperson reported that the district has 35 days of operating cash on hand, which is approximately $14 million. The administration’s goal is 120 days of cash on hand.

On a more positive note, Moody’s emphasized the district’s “large and growing tax base, average wealth and income levels, and the stabilizing presence of Naval Air Station Whidbey Island.”

The ratings can be raised in the future, Moody’s reported, with improved cash flow and greater patient volumes.

Moody’s downgraded the hospital’s bond ratings twice last year and even predicted that it was unlikely to make payroll without a $17 million loan. The district, however, had no disruption in payroll due to the county treasurer distributing property tax dollars more frequently and repayment of the line of credit being delayed, as well as other positive changes in hospital finances.

The elected board members fired the hospital’s former CEO last year amid revelations of the district’s financial problems and hired a health care management firm.