14 health systems with strong finances

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Here are 14 health systems with strong operational metrics and solid financial positions, according to reports from Fitch Ratings, Moody’s Investors Service and S&P Global Ratings.

1. Advocate Aurora Health has an “Aa3” rating and positive outlook with Moody’s. The health system, which has dual headquarters in Milwaukee and Downers Grove, Ill., has a leading market share in two regions and strong financial discipline, Moody’s said. The credit rating agency said it expects Advocate Aurora Health’s operating cash flow margins to return to pre-pandemic levels. 

2. Pinehurst, N.C.-based FirstHealth of the Carolinas has an “AA” rating and stable outlook with Fitch. The health system has a strong financial profile and stable operating performance, despite disruption from the COVID-19 pandemic, Fitch said. The health system’s revenue in the first quarter of fiscal 2021 rebounded to levels close to historical trends, according to the credit rating agency. 

3. Indianapolis-based Indiana University Health has an “Aa2” rating and stable outlook with Moody’s and an “AA” rating and positive outlook with Fitch. Cost controls and patient volume will help the system sustain strong margins and liquidity, Moody’s said. 

4. Rapid City, S.D.-based Monument Health has an “AA-” rating and stable outlook with Fitch. The health system has solid operating margins that Fitch expects to remain stable over the near term. Monument Health’s operating margins will continue to support liquidity growth and capital spending levels, the credit rating agency said. 

5. Chicago-based Northwestern Medicine has an “Aa2” rating and stable outlook with Moody’s, and an “AA+” rating and stable outlook with S&P. The system’s consolidated operating model will allow it to maintain a strong financial position while effectively executing strategies, Moody’s said. The credit rating agency expects Northwestern Medicine to expand its prominent market position in the broader Chicago region because of its strong brand and affiliation with Northwestern University’s Feinberg School of Medicine. 

6. Renton, Wash.-based Providence has an “AA-” rating and stable outlook with Fitch and an “Aa3” rating and stable outlook with Moody’s. Fitch said Providence has a long-term strategic advantage over most of its peers because it has invested heavily in developing technology in recent years, and the system’s plan to transform healthcare delivery through the use of data and technology has been undeterred through the COVID-19 pandemic. Fitch said it expects Providence’s cash flow margins to be close to 7 percent in the coming years. 

7. Livingston, N.J.-based RWJBarnabas Health has an “Aa3” rating and stable outlook with Moody’s. Moody’s said it expects RWJBarnabas, the largest integrated academic health system in New Jersey, to see near-term revenue growth and to execute on several strategic fronts while achieving targeted financial performance.  

8. Broomfield, Colo.-based SCL Health has an “AA-” rating and stable outlook with Fitch and an “Aa3” rating and stable outlook with Moody’s. The health system has consistently improved its liquidity levels and has a long track record of exceptional operations, Fitch said. SCL Health is well positioned for change in the healthcare sector because it has built up cash reserves over time, according to the credit rating agency. 

9. San Diego-based Scripps Health has an “Aa3” rating and stable outlook with Moody’s. The health system has ample liquidity coverage, an extensive footprint and strong brand and market share within San Diego County, Moody’s said. The credit rating agency said it expects Scripps to weather current operating challenges and to grow operating cash flow over the long term. 

10. Norfolk, Va.-based Sentara Healthcare has an “Aa2” rating and stable outlook with Moody’s. The health system has strong margins, and Moody’s said it expects the system to maintain a strong financial position and balance sheet. 

11. Arlington-based Texas Health Resources has an “Aa2” rating and stable outlook with Moody’s. The health system has a strong cash position, which will be boosted by favorable investment gains and bond proceeds, Moody’s said. Based on performance in the second quarter of this year, Moody’s expects Texas Health Resources’ patient volume and operating cash flow margins to recover to pre-COVID-19 levels. 

12. Iowa City-based University of Iowa Hospitals & Clinics has an “Aa2” rating and stable outlook with Moody’s. The credit rating agency said it expects the system to maintain strong operating performance and cash flow. The system benefits as the only academic medical center in Iowa, according to Moody’s. 

13. Des Moines, Iowa-based UnityPoint Health has an “AA-” rating and stable outlook with Fitch. The system has strong leverage metrics, and it benefited from strong market returns during the pandemic. The system’s days with cash on-hand increased to 285 days at the end of 2020, up from 231 days at the end of 2019, according to the credit rating agency. 

14. Kansas City-based University of Kansas Health System has an “AA-” rating and stable outlook with Fitch. The health system has solid operating results and has sustained significant revenue growth, Fitch said. The system’s profitability dipped in fiscal year 2020 because of the COVID-19 pandemic, but its profitability rebounded in fiscal year 2021, according to the credit rating agency. 

18 health systems with strong finances

Hospital Mergers, Acquisitions, and Affiliations | Case Study – RMS

Here are 18 health systems with strong operational metrics and solid financial positions, according to reports from Fitch Ratings, Moody’s Investors Service and S&P Global Ratings.

1. Altamonte Springs, Fla.-based AdventHealth has an “Aa2” rating and stable outlook with Moody’s and an “AA” rating and a stable outlook with Fitch. The system has strong profitability, solid liquidity and presence in several high growth markets, Fitch said.

2. St. Louis-based BJC HealthCare has an “AA” rating and stable outlook with S&P and an “Aa2” rating and stable outlook with Moody’s. The health system has a leading market share and a highly regarded reputation, particularly for its flagship hospitals that are affiliated with Washington University School of Medicine in St. Louis, S&P said. The health system has consistently produced stable earnings and cash flow, even during the COVID-19 pandemic, according to the credit rating agency. 

3. Dallas-based Children’s Health System of Texas has an “AA” rating and stable outlook with Fitch. The system has robust operating profitability, good expense management and strong EBITDA margins, according to Fitch. 

4. Cleveland Clinic has an “Aa2” rating and stable outlook with Moody’s. The system’s international brand will allow it to grow revenue outside of the northeast Ohio market and offset the effects of the pandemic on patient volume, Moody’s said. The credit rating agency expects the system to maintain good cash flow margins. 

5. Evansville, Ind.-based Deaconess Health System has an “AA” rating and stable outlook with Fitch. The health system has strong operating performance and an expanding footprint in a stable and economically diverse service area, Fitch said. Investments in core service lines should help support patient volume growth, according to the credit rating agency. 

6. Durham, N.C.-based Duke Health has an “AA” rating and stable outlook with Fitch. The system has a strong clinical reputation and a solid balance sheet with substantial liquidity reserves, Fitch said. 

7. Pinehurst, N.C.-based FirstHealth of the Carolinas has an “AA” rating and stable outlook with Fitch. The health system has a strong financial profile and stable operating performance, despite disruption from the COVID-19 pandemic, Fitch said. The health system’s revenue in the first quarter of fiscal 2021 rebounded to levels close to historical trends, according to the credit rating agency. 

8. Milwaukee-based Froedtert Health has an “AA” rating and stable outlook with Fitch. The system has a solid market position and a robust liquidity position, Fitch said. The credit rating agency expects Froedtert to maintain robust operating cash flow levels. 

9. Indianapolis-based Indiana University Health has an “Aa2” rating and stable outlook with Moody’s and an “AA” rating and positive outlook with Fitch. Cost controls and patient volume will help the system sustain strong margins and liquidity, Moody’s said. 

10. IHC Health Services, the borrowing group of Salt Lake City-based Intermountain Healthcare, has an “Aa1” rating and stable outlook with Moody’s. Intermountain has a leading statewide market position, low debt levels and strong cash levels, Moody’s said. The credit rating agency expects Intermountain will sustain strong margins and cash levels. 

11. Falls Church, Va.-based Inova Health System has an “Aa2” rating and stable outlook with Moody’s. The system has a strong financial profile, and Moody’s expects Inova’s balance sheet to remain exceptionally strong. 

12. Rochester, Minn.-based Mayo Clinic has an “Aa2” rating and stable outlook with Moody’s. The health system has strong balance sheet measures, an excellent market position and strong patient demand at its three academic campuses in Minnesota, Arizona and Florida, Moody’s said. The credit rating agency expects strong patient demand and steps taken by management to allow Mayo to maintain adequate cash flow and strengthen balance sheet measures. 

13. Traverse City, Mich.-based Munson Healthcare has an “AA” rating and stable outlook with Fitch. The system has strong leverage and liquidity, Fitch said. The credit rating agency expects Munson to maintain solid operating cash flow margins. 

14. Tupelo-based North Mississippi Health Services has an “AA” rating and stable outlook with Fitch. The system has a leading market share in a large 20-county service area and strong adjusted leverage metrics, Fitch said. 

15. Chicago-based Northwestern Memorial HealthCare has an “Aa2” rating and stable outlook with Moody’s and an “AA+” rating and stable outlook with S&P. The health system had strong pre-COVID margins and liquidity, Moody’s said. The credit rating agency expects the system to maintain strong operating cash flow margins. 

16. Columbus-based OhioHealth has an “Aa2” rating and stable outlook with Moody’s and an “AA+” rating and stable outlook with S&P. The system has a leading market position and opportunities for service line expansion, Moody’s said. The credit rating agency expects the system’s strong liquidity to provide ample cushion for volatility in investment returns. 

17. Stanford (Calif.) Health Care has an “AA” rating and stable outlook with Fitch. The system has broad reach and is a clinical destination for high acuity services, Fitch said. The credit rating agency expects the system to sustain strong EBITDA margins. 

18. Iowa City-based University of Iowa Hospitals & Clinics has an “Aa2” rating and stable outlook with Moody’s. The credit rating agency expects the system to maintain strong operating performance and cash flow. The system benefits as the only academic medical center in Iowa, according to Moody’s. 

10 health systems with strong finances

Here are 10 hospitals and health systems with strong operational metrics and solid financial positions, according to reports from Fitch Ratings and Moody’s Investors Service. 

1. Altamonte Springs, Fla.-based AdventHealth has an “Aa2” rating and stable outlook from Moody’s. The credit rating agency said the system benefits from strong operating cash flow margins, low operating leverage and a large scale with presence in multiple states.  

2. Children’s Hospital of Philadelphia has an “Aa2” rating and stable outlook from Moody’s. The credit rating agency said the rating is reflective of Children’s Hospital of Philadelphia’s strong market position and brand equity as a top U.S. children’s hospital with advanced clinical research. The pediatric hospital network also has strong liquidity.

3. Cleveland Clinic has an “Aa2” rating and stable outlook from Moody’s. The credit rating agency said the health system benefits from its reputation as an international brand, which will allow it to grow revenue outside of the Ohio market. Moody’s said it maintains good cash flow margins and therefore very strong liquidity.

4. Cottage Health in Santa Barbara, Calif., has an “AA-” rating and stable outlook from Fitch. The credit rating agency said Cottage benefits from consistently strong profitability, a strong balance sheet and leading market position. Fitch also said the health system has broad reach in a service area that has high demand for acute care services. 

5. Froedtert Health in Wauwatosa, Wis., has an “AA” rating and stable outlook from Fitch. The credit rating agency said the rating reflects the health system’s solid market position and robust liquidity position, as well as its strong utilization trends and operational metrics in recent years. 

6. Indiana University Health in Indianapolis has an “AA” rating and positive outlook from Fitch. The credit rating agency said the health system has a long track record of strong operating margins and a “remarkably solid” balance sheet. The system also benefits as the largest healthcare system and academic medical center in Indiana, according to Fitch.

7. Vineland, N.J.-based Inspira Health has an “AA-” rating and stable outlook from Fitch. The credit rating agency said the rating is supported by Inspira’s stable financial profile, leading market position, large medical staff and expansive outpatient network. Fitch also said Inspira saw a strong operating performance through the construction and transition of its new campus, an IT implementation and through the peak of the pandemic.

8. Sanford Health in Sioux Falls, S.D., has an “AA-” rating and stable outlook from Fitch. The credit rating agency said the “AA-” rating reflects Sanford’s leading inpatient market share in multiple states and strong financial profile. Fitch also said Sanford’s growing health plan and plan for continued improvement and balance sheet growth are credit positives. 

9. Spectrum Health in Grand Rapids, Mich., has an “Aa3” rating and stable outlook with Moody’s. The credit rating agency said the health system has a stable operating performance and strong balance sheet metrics. In particular, the system generated positive margins even without federal aid in fiscal year 2020. Moody’s said the health system will continue to benefit from a strong market share for patient care in western Michigan. 

10. Texas Children’s Hospital in Houston has an “Aa2” rating and stable outlook from Moody’s. The credit rating agency said the children’s hospital network benefits from favorable leverage metrics and strong liquidity. Moody’s also said Texas Children’s has very strong patient demand and high acuity services as the academic medical center for Baylor College of Medicine’s pediatric department in Houston.

Hospitals saw gains in volume, revenue and margin in April, finds Kaufman Hall

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Hospitals saw gains in volume, revenue and margin in April, finds Kaufman  Hall | Healthcare Finance News

The signs of progress are encouraging, but the metrics are still down slightly when compared to last month.

Slowly, the financial health of the nation’s healthcare institutions are improving. Hospitals and health systems continued to see performance improvements in April compared to the devastating losses experienced in the early months of the COVID-19 pandemic.

Hospital margins, volumes, and revenues were up across most performance metrics, both year-to-date and year-over-year, but were down compared to March, according to the latest issue of Kaufman Hall’s National Hospital Flash Report. There was no explicit reason given for the dip, but any number of factors small and large could play into the results. It’s possible that clearer trend lines will develop over time.

WHAT’S THE IMPACT?

While any signs of progress are encouraging, the April results draw a clear contrast to the severity of record-low performance seen during the first two months of the pandemic in 2020, rather than strong overall performance so far this year.

Operating margin, for example, rose 101.9% (or 8.6 percentage points) compared to January-April 2020, not including federal Coronavirus Aid, Relief, and Economic Security Act funding. With the funding, operating margin was up 90.6% year-to-date, or 6.9 percentage points. 

Operating margin was up 113.1% (39.3%) without CARES and 109.5% (21.4%) with CARES, compared to the first full month of the pandemic in April 2020, when nationwide shutdowns and broad restrictions on outpatient procedures caused operating margins to plummet 282% year-over-year.

April 2021 hospital margins, however, remained relatively thin. The median Kaufman Hall hospital operating margin index was 2.4% for the month, not including CARES. Even with the funding, it was 3.3%.

When it came to volumes, hospitals saw them increase across most metrics compared to 2020 levels, but decrease slightly compared to March. Adjusted discharges were up 5.9% year-to-date and jumped 66.4% year-over-year, while adjusted patient days rose 10% year-to-date and 64.8% year-over-year. Both metrics fell 1% month-over-month.

Emergency department visits were mixed, falling 7% compared to the first four months of 2020, but rising 57.2% year-over-year and 5.3% month-over-month. Operating room minutes were down 3.6% from March, but increased 26.1% year-to-date, and shot up 189.2% compared to April 2020, when COVID-19 abruptly halted most outpatient procedures.

Revenues followed a similar pattern, with gross operating revenue (not including CARES) up 16.7% year-to-date and 71.8% year-over-year, but down 2.5% compared to the prior month. Inpatient revenue rose 10.6% year-to-date and 37.1% year-over-year, but was down 1.9% month-over-month. Outpatient revenue rose 20.3% year-to-date, jumped 114.8% compared to April 2020, but fell 2% from March.

Total expenses continued to increase both year-to-date and year-over-year, but saw moderate decreases month-over-month. Total expense was up 6.6% year to date and 13.1% year over year. Total labor expense increased 6.1% year-to-date and 9.4% year-over-year, and total nonlabor expense rose 7% year-to-date and 16.3% year-over-year. 

Compared to March, though, all three metrics were down about 3%. Expense results were mixed when adjusted for the month’s volumes. Total expense per adjusted discharge, for example, increased 2% compared to January-April 2020, but fell 32.3% from April 2020 and 2% from March. 

THE LARGER TREND

Despite the ongoing pandemic, the 2021 financial outlook for the global healthcare sector is mostly positive, as strong demand for products and services – including those related to COVID-19 – will more than offset lingering pressures from the public health emergency, Moody’s Investors Service found in December.

The demand will remain strong, largely due to aging populations, the improvement in access and the introduction of new and innovative products. There is one caveat: steadily rising healthcare expenditures, which will cause payers to continue to restrict utilization and lower prices.

In October, Moody’s found that owning a public hospital during the COVID-19 pandemic carried operational risk, which will compound the fiscal and credit difficulties facing many large urban counties across the U.S.

Whether recovery from the coronavirus this year is relatively rapid or relatively slow, America’s hospitals will face another year of struggle to regain their financial health.
 

10 health systems with strong finances

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Here are 10 health systems with strong operational metrics and solid financial positions, according to reports from Fitch Ratings, Moody’s Investors Service and S&P Global Ratings.

1. St. Louis-based BJC HealthCare has an “AA” rating and stable outlook with S&P. The health system has a leading market share and highly regarded reputation, particularly for its flagship hospitals that are affiliated with Washington University School of Medicine in St. Louis, S&P said. The health system consistently has produced stable earnings and cash flow, even during the COVID-19 pandemic, according to the credit rating agency. 

2. Cleveland Clinic has an “Aa2” rating and stable outlook from Moody’s. The credit rating agency said the health system benefits from its reputation as an international brand, which will allow it to grow revenue outside of the Ohio market. Moody’s said it maintains good cash flow margins and therefore very strong liquidity.

3. Fountain Valley, Calif.-based MemorialCare has an “AA-” rating and stable outlook with Fitch. The health system has a strong financial profile and maintains high liquidity, Fitch said. The credit rating agency expects the system to generate cash flows of approximately 7 percent in the years after fiscal 2021. 

4. Winston-Salem, N.C.-based Novant Health has an “AA-” rating and stable outlook with Fitch. The health system has a solid market position in four regions and strong financial metrics that support the rating. The credit rating agency said Novant Health’s acquisition of New Hanover Regional Medical Center in Wilmington, N.C., will benefit the system financially and strategically in the long term.

5. OhioHealth has an “Aa2” rating and stable outlook from Moody’s. The credit rating agency said the health system has a leading market position with several growth opportunities in an attractive market and a favorable payer market that contributes to stability. Moody’s also said OhioHealth’s ongoing cost reductions and management discipline will continue to support strong margins and liquidity levels. 

6. Rady Children’s Hospital and Health Center in San Diego has an “Aa3” rating and stable outlook with Moody’s. The credit rating agency said that Rady Children’s has an extremely high market share in San Diego County and benefits from its status as a regional referral center for tertiary and quaternary pediatric services. The health system also has very strong liquidity, Moody’s said. 

7. Stanford (Calif.) Health has an “AA” rating and stable outlook with Fitch. The credit rating agency said the hospital has a broad reach and benefits, as it is a clinical destination for high-acuity services, a largely favorable service area and a close relationship with Stanford University. Fitch said it expects the health system’s post-2021 EBITDA margin to be closer to its historical 11 percent operating margin. 

8. Spectrum Health in Grand Rapids, Mich., has an “Aa3” rating and stable outlook with Moody’s. The credit rating agency said the health system has a stable operating performance and strong balance sheet metrics. In particular, the system generated positive margins even without federal relief aid in fiscal year 2020. Moody’s added that the health system will continue to benefit from a strong market share for patient care in western Michigan. 

9. SSM Health in St. Louis has an “AA-” rating and stable outlook with Fitch. The credit rating agency said it has a strong financial profile and a solid market presence in multiple states with no dependence on any one location. Fitch also said its expanding health plan is a credit positive. 

10. Birmingham, Ala.-based UAB Medicine has an “Aa3” rating and stable outlook with Moody’s. The credit rating agency said the health system has high patient demand, strong margins and a leading market share in Birmingham. The credit rating agency expects UAB Medicine to generate strong cash flow in fiscal year 2021.

11 health systems with strong finances

11 health systems with strong finances

Hospital Mergers, Acquisitions, and Affiliations | Case Study – RMS

Here are 11 health systems and hospitals with strong operational metrics and solid financial positions, according to reports from Fitch Ratings, Moody’s Investors Service and S&P Global Ratings.

1. Morristown, N.J.-based Atlantic Health System has an “Aa3” rating and stable outlook with Moody’s. The credit rating agency expects the health system to continue to generate favorable operating performance and to maintain double-digit operating cash flow margins and solid debt coverage. 

2. Charlotte, N.C.-based Atrium Health has an “Aa3” rating and stable outlook with Moody’s and an “AA-” rating and stable outlook with S&P. Atrium and Winston-Salem, N.C.-based Wake Forest Baptist Health merged in October. The addition of the Winston-Salem service area and Wake Forest Baptist’s academic and research programs enhances Atrium’s position within the highly competitive North Carolina healthcare market, S&P said. 

3. Dallas-based Baylor Scott & White Health has an “Aa3” rating and stable outlook with Moody’s. The system has strong liquidity and is the largest nonprofit health system in Texas, Moody’s said. The credit rating agency expects Baylor Scott & White Health to continue to benefit from its centralized operating model, proven ability to execute complex strategies and well-developed planning abilities. 

4. Pittsfield, Mass.-based Berkshire Health System has an “AA-” rating and stable outlook with Fitch. The health system has improved its liquidity while investing in facilities without increasing its debt load, Fitch said. The credit rating agency expects the system to maintain a strong financial profile. 

5. Mishawaka, Ind.-based Franciscan Alliance has an “Aa3” rating and stable outlook with Moody’s. The system has leading positions in key markets and a strong cash position, Moody’s said. The credit rating agency expects the system to sustain double-digit operating cash flow margins. 

6. Falls Church, Va.-based Inova Health System has an “Aa2” rating and stable outlook with Moody’s. The system has a strong financial profile, and Moody’s expects Inova’s balance sheet to remain exceptionally strong. 

7. Palo Alto, Calif.-based Lucile Packard Children’s Hospital at Stanford has an “AA-” rating and stable outlook with Fitch. The hospital is nationally known, has a strong market position and is one of two key clinical partners of Stanford University, Fitch said. 

8. Grand Blanc, Mich.-based McLaren Health Care has an “AA-” rating and stable outlook with Fitch. The health system has a strong financial profile and a leading market position over a broad service area that covers much of Michigan, Fitch said. 

9. Winston-Salem, N.C.-based Novant Health has an “AA-” rating and stable outlook with Fitch. The system has strong margins, and each of its markets has met or exceeded budgeted expectations over the past four years, Fitch said. 

10. Renton, Wash.-based Providence has an “Aa3” rating and stable outlook with Moody’s. Providence has a large revenue base and a leading market share in most of its markets, according to Moody’s. The credit rating agency expects the system’s operations to improve this year. 

11. Livonia, Mich.-based Trinity Health has an “AA-” rating and stable outlook with Fitch. The rating is driven by Trinity’s national size and scale, with significant market presence in several states, Fitch said. The credit rating agency expects the system’s operating margins to improve in the long term. 

14 health systems with strong finances

14 health systems with strong finances

Hospital Mergers, Acquisitions, and Affiliations | Case Study – RMS

Here are 14 health systems with strong operational metrics and solid financial positions, according to reports from Fitch Ratings, Moody’s Investors Service and S&P Global Ratings.

1. St. Louis-based Ascension has an “AA+” rating and stable outlook with Fitch and an “Aa2” rating and stable outlook with Moody’s. The system has a strong financial profile and a significant presence in several key markets, Fitch said. The credit rating agency expects Ascension will continue to produce healthy operating margins. 

2. Charlotte, N.C.-based Atrium Health has an “Aa3” rating and stable outlook with Moody’s and an “AA-” rating and stable outlook with S&P. Atrium and Winston-Salem, N.C.-based Wake Forest Baptist Health merged in October. The addition of the Winston-Salem service area and Wake Forest Baptist’s academic and research programs enhance Atrium’s position within the highly competitive North Carolina healthcare market, S&P said. 

3. Phoenix-based Banner Health has an “AA-” rating and stable outlook with Fitch and S&P. Banner’s financial profile is strong, even taking into consideration the market volatility that occurred in the first quarter of 2020, Fitch said. The credit rating agency expects the system to continue to improve operating margins and to generate cash flow sufficient to sustain strong key financial metrics. 

4. Dallas- based Baylor Scott & White Health has an “Aa3” rating and stable outlook with Moody’s. The system has strong liquidity and is the largest nonprofit health system in Texas, Moody’s said. The credit rating agency expects Baylor Scott & White Health to continue to benefit from its centralized operating model, proven ability to execute complex strategies and well-developed planning abilities. 

5. Newark, Del.-based ChristianaCare Health System has an “Aa2” rating and stable outlook with Moody’s. The health system has extensive clinical depth and includes Delaware’s largest teaching hospital, Moody’s said. The system’s strong market position will help it resume near pre-pandemic level margins in fiscal year 2021, according to Moody’s. 

6. Falls Church, Va.-based Inova Health System has an “Aa2” rating and stable outlook with Moody’s. The system has a strong financial profile, and Moody’s expects Inova’s balance sheet to remain exceptionally strong. 

7. Philadelphia-based Main Line Health has an “AA” rating and stable outlook with Fitch. The credit rating agency expects the system’s operations to recover after the COVID-19 pandemic and for it to resume its track record of strong operating cash flow margins. 

8. Rochester, Minn.-based Mayo Clinic has an “Aa2” rating and stable outlook with Moody’s. The system has an excellent reputation and generates strong patient demand at its academic medical centers in Minnesota, Arizona and Florida, Moody’s said. The credit rating agency said strong patient demand and proactive expense control measures would likely fuel good results for Mayo for the fiscal year that ended Dec. 31.

9. Midland-based MidMichigan Health has an “AA-” rating and stable outlook with Fitch. The system generated healthy operational levels through fiscal year 2020, and Fitch expects it to continue generating strong cash flow. 

10. Chicago-based Northwestern Memorial HealthCare has an “Aa2” rating and stable outlook with Moody’s. The health system had strong pre-COVID margins and liquidity, Moody’s said. The credit rating agency expects the system to maintain strong operating cash flow margins. 

11. Winston-Salem, N.C.-based Novant Health has an “AA-” rating and stable outlook with Fitch. The system has strong margins and each of its markets have met or exceeded budgeted expectations over the past four years, Fitch said.  

12. Albuquerque, N.M.-based Presbyterian Healthcare Services has an “AA” rating and stable outlook with Fitch. The health system has a strong financial profile and a leading market position in Albuquerque and throughout New Mexico, Fitch said. The credit rating agency said it believes Presbyterian Healthcare Services is more resilient to pandemic disruptions than most other hospital systems. 

13. Renton, Wash.-based Providence has an “Aa3” rating and stable outlook with Moody’s. Providence has a large revenue base and a leading market share in most of its markets, according to Moody’s. The credit rating agency expects the system’s operations to improve this year. 

14. Livonia, Mich.-based Trinity Health has an “AA-” rating and stable outlook with Fitch. The rating is driven by Trinity’s national size and scale, with significant market presence in several states, Fitch said. The credit rating agency expects the system’s operating margins to improve in the long term. 

9 hospitals with strong finances

9 hospitals with strong finances

https://www.beckershospitalreview.com/finance/9-hospitals-with-strong-finances-102020.html?utm_medium=email

Here are nine hospitals and health systems with strong operational metrics and solid financial positions, according to reports from Fitch Ratings, Moody’s Investors Service and S&P Global Ratings.

1. St. Louis-based Ascension has an “AA+” rating and stable outlook with Fitch. The system has a strong financial profile and a significant presence in several key markets, Fitch said. The credit rating agency expects Ascension will continue to produce healthy operating margins. 

2. Phoenix-based Banner Health has an “AA-” rating and stable outlook with Fitch and S&P. Banner’s financial profile is strong, even taking into consideration the market volatility that occurred in the first quarter of this year, Fitch said. The credit rating agency expects the system to continue to improve operating margins and to generate cash flow sufficient to sustain strong key financial metrics. 

3. Cincinnati-based Bon Secours Mercy Health has an “AA-” rating and stable outlook with Fitch. The health system has a good payer mix, a leading position in several of its markets and adequate margins to support its growth, Fitch said. The credit rating agency expects the system to maintain strong operating profitability.  

4. Children’s Hospital of Philadelphia has an “Aa2” rating and stable outlook with Moody’s and an “AA” rating and stable outlook with S&P. The hospital has a strong market position and healthy liquidity, Moody’s said. The credit rating agency expects CHOP’s market position and brand equity will support its recovery from disruption caused by COVID-19. 

5. Milwaukee-based Children’s Wisconsin has an “Aa3” rating and stable outlook with Moody’s and an “AA” rating and stable outlook with S&P. The health system has strong cash flow margins, Moody’s said. The credit rating agency expects the health system’s financial performance to remain solid, given its commanding market presence and demand for services. 

6. Philadelphia-based Main Line Health has an “AA” rating and stable outlook with Fitch. The credit rating agency expects the system’s operations to recover after the COVID-19 pandemic and for it to resume its track record of strong operating cash flow margins. 

7. Midland-based MidMichigan Health has an “AA-” rating and stable outlook with Fitch. The system has generated healthy operational levels through fiscal year 2020, and Fitch expects it to continue generating strong cash flow. 

8. Columbus, Ohio-based Nationwide Children’s Hospital has an “Aa2” rating and stable outlook with Moody’s. The system has a strong market position in pediatric services in Columbus and the broad central Ohio region, and its advanced research capabilities will support volume recovery from disruption caused by COVID-19, Moody’s said. The credit rating agency expects Nationwide Children’s margins to remain strong and for cost management initiatives and volume recovery to drive improvements. 

9. Chicago-based Northwestern Memorial HealthCare has an “Aa2” rating and stable outlook with Moody’s. The health system had strong pre-COVID margins and liquidity, Moody’s said. The credit rating agency expects the system to maintain strong operating cash flow margins. 

8 health systems with strong finances

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Here are eight health systems with strong operational metrics and solid financial positions, according to reports from Fitch Ratings, Moody’s Investors Service and S&P Global Ratings.

1. Minneapolis-based Allina Health has an “AA-” rating and stable outlook with Fitch. The health system has a strong financial profile and is the acute care leader in the broad Twin Cities metro area, Fitch said. The credit rating agency said Allina’s proven ability to rebound quickly from operating challenges supports the stable outlook.

2. Children’s Healthcare of Atlanta has an “Aa2” rating and stable outlook with Moody’s. The system has strong operating margins and is the leading pediatric provider in the Atlanta area, Moody’s said. The credit rating agency expects Children’s Healthcare of Atlanta to continue to generate robust margins and maintain exceptional liquidity while undergoing a new campus expansion project.

3. La Crosse, Wis.-based Gundersen Health System has an “AA-” rating and stable outlook with Fitch. The health system has consistently strong operating performance, strong balance sheet metrics and a low debt burden, Fitch said. The credit rating agency said Gundersen’s rating continues to be supported by its leading market position and expanding operating platform.

4. Houston Methodist has an “AA” rating and stable outlook with S&P. The system, which comprises an academic medical center and six community hospitals, has a strong enterprise profile and a history of excellent margins and cash flow, S&P said. The credit rating agency said Houston Methodist is well positioned to withstand the pressures from COVID-19.

5. Indianapolis-based Indiana University Health has an “AA” rating and stable outlook with Fitch. The health system has a solid balance sheet and strong operating cash flow despite short-term pressure from the COVID-19 pandemic. The credit rating agency expects IU Health’s EBITDA margins will range between 12 percent and 14 percent annually when margins recover from the pandemic.

6. Broomfield, Colo.-based SCL Health has an “AA-” rating and stable outlook with Fitch and an “Aa3” rating and stable outlook with Moody’s. The system has a track record of exceptional operations, consistent improvement in unrestricted liquidity levels and significant financial flexibility, Fitch said. The credit rating agency said SCL Health is well positioned to manage the pressures of COVID-19, having built up cash reserves.

7. San Diego-based Scripps Health has an “AA” rating and stable outlook with Fitch and an “Aa3” rating and stable outlook with Moody’s. The health system has a strong balance sheet, strong operations and has maintained a low leverage position, Fitch said. The credit rating agency expects Scripps will continue generating operating levels that are consistent with historical trends following recovery from the pandemic.

8. San Diego-based Sharp HealthCare has an “Aa3” rating and stable outlook with Moody’s and an “AA” rating and stable outlook with S&P. The health system has a healthy financial profile, an excellent balance sheet, a solid business position and is the leading provider in a competitive service area, S&P said. The credit rating agency said the system’s financial performance has remained stable despite COVID-19 and the recession.

 

 

Despite turbulence in H1, no avalanche of health systems downgrades

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“It’s new territory, which is why we’re taking that measured approach on rating actions,” Suzie Desai, senior director at S&P, said.

The healthcare sector has been bruised from the novel coronavirus and the effects are likely to linger for years, but the first half of 2020 has not resulted in an avalanche of hospital and health system downgrades.

At the outset of the pandemic, some hospitals warned of dire financial pressures as they burned through cash while revenue plunged. In response, the federal government unleashed $175 billion in bailout funds to help prop up the sector as providers battled the effects of the virus.

Still, across all of public finance — which includes hospitals — the second quarter saw downgrades outpacing upgrades for the first time since the second quarter of 2017.

S&P characterized the second quarter as a “historic low” for upgrades across its entire portfolio of public finance credits.

“While only partially driven by the coronavirus, the second quarter was the first since Q2 2017 with the number of downgrades surpassing upgrades and by the largest margin since Q3 2014,” according to a recent Moody’s Investors Service report.

Through the first six months of this year, Moody’s has recorded 164 downgrades throughout public finance and, more specifically, 27 downgrades among the nonprofit healthcare entities it rates.

By comparison, Fitch Ratings has recorded 14 nonprofit hospital and health system downgrades through July and just two upgrades, both of which occurred before COVID-19 hit.

“Is this a massive amount of rating changes? By no means,” Kevin Holloran, senior director of U.S. Public Finance for Fitch, said of the first half of 2020 for healthcare.

Also through July, S&P Global recorded 22 downgrades among nonprofit acute care hospitals and health systems, significantly outpacing the six healthcare upgrades recorded over the same period.

“It’s new territory, which is why we’re taking that measured approach on rating actions,” Suzie Desai, senior director at S&P, said.

Still, other parts of the economy lead healthcare in terms of downgrades. State and local governments and the housing sector are outpacing the healthcare sector in terms of downgrades, according to S&P.

Virus has not ‘wiped out the healthcare sector’

Earlier this year when the pandemic hit the U.S., some made dire predictions about the novel coronavirus and its potential effect on the healthcare sector.

Reports from the ratings agencies warned of the potential for rising covenant violations and an outlook for the second quarter that would result in the “worst on record, one Fitch analyst said during a webinar in May.

That was likely “too broad of a brushstroke,” Holloran said. “It has not come in and wiped out the healthcare sector,” he said. He attributes that in part to the billions in financial aid that the federal government earmarked for providers.

Though, what it has revealed is the gaps between the strongest and weakest systems, and that the disparities are only likely to widen, S&P analysts said during a recent webinar.

The nonprofit hospitals and health systems pegged with a downgrade have tended to be smaller in size in terms of scale, lower-rated already and light on cash, Holloran said.

Still, some of the larger health systems were downgraded in the first half of the year by either one of the three rating agencies, including Sutter Health, Bon Secours Mercy Health, Geisinger, University of Pittsburgh Medical Center and Care New England.

“This is something that individual management of a hospital couldn’t control,” said Rick Gundling, senior vice president of Healthcare Financial Management Association, which has members from small and large organizations. “It wasn’t a bad strategy — that goes into a downgrade. This happened to everybody.”

Deteriorating payer mix

Looking forward, some analysts say they’re more concerned about the long-term effects for hospitals and health systems that were brought on by the downturn in the economy and the virus.

One major concern is the potential shift in payer mix for providers.

As millions of people lose their job they risk losing their employer-sponsored health insurance. They may transition to another private insurer, Medicaid or go uninsured.

For providers, commercial coverage typically reimburses at higher rates than government-sponsored coverage such as Medicare and Medicaid. Treating a greater share of privately insured patients is highly prized.

If providers experience a decline in the share of their privately insured patients and see a growth in patients covered with government-sponsored plans, it’s likely to put a squeeze on margins.

The shift also poses a serious strain for states, and ultimately providers. States are facing a potential influx of Medicaid members at the same time state budgets are under tremendous financial pressure. It raises concerns about whether states will cut rates to their Medicaid programs, which ultimately affects providers.

Some states have already started to re-examine and slash rates, including Ohio.