12 health systems with strong finances

https://www.beckershospitalreview.com/finance/12-health-systems-with-strong-finances-120618.html?origin=rcme&utm_source=rcme

Here are 12 health systems with strong operational metrics and solid financial positions, according to recent reports from Moody’s Investors Service, Fitch Ratings and S&P Global Ratings.

Note: This is not an exhaustive list. Health system names were compiled from recent credit rating reports and are listed in alphabetical order.

1. St. Louis-based Ascension has an “Aa2” senior debt rating and stable outlook with Moody’s. The health system has a large diversified portfolio of sizable hospitals and strong liquidity. Moody’s expects Ascension’s margins to improve in fiscal year 2019.

2. Wausau, Wis.-based Aspirus has an “AA-” rating and stable outlook with S&P. The health system has solid debt and liquidity metrics, according to S&P.

3. Morristown, N.J.-based Atlantic Health System has an “Aa3” rating and stable outlook with Moody’s. The system has a strong market position, favorable balance sheet ratios and strong operating performance, according to Moody’s.

4. Charlotte, N.C.-based Atrium Health has an “AA-” rating and stable outlook with S&P. The health system has a strong operating profile, favorable payer mix, healthy financial performance and sustained volume growth, according to S&P.

5. Durham, N.C.-based Duke University Health System has an “Aa2” rating and stable outlook with Moody’s. The health system is a leading provider of tertiary and quaternary services and has solid margins and cash levels, according to Moody’s.

6. Inova Health System has an “Aa2” rating and stable outlook with Moody’s. The Falls Church, Va.-based health system has consistently strong cash-flow margins, a leading market position and a good investment position, according to Moody’s.

7. Baltimore-based Johns Hopkins Health System has an “Aa2” rating and stable outlook with Moody’s. The health system has favorable liquidity metrics, strong fundraising capabilities, a healthy market position and regional brand recognition, according to Moody’s.

8. St. Louis-based Mercy Health has an “Aa3” rating and stable outlook with Moody’s. The health system has favorable cash-flow metrics, a solid strategic growth plan, a broad service area and improving operating margins, according to Moody’s.

9. Traverse City, Mich.-based Munson Healthcare has an “AA-” rating and positive outlook with Fitch. The health system has a leading market share in a favorable demographic area and a healthy net leverage position, according to Fitch.

10. Vancouver, Wash.-based PeaceHealth has an “AA-” rating and stable outlook with Fitch. The health system has a leading market position, robust reserves and strong cash flow, according to Fitch.

11. St. Louis-based SSM Health Care has an “AA-” rating and stable outlook with Fitch. SSM has a strong financial profile, and Fitch expects the system to continue growing unrestricted liquidity and to maintain improved operational performance.

12. Appleton, Wis.-based ThedaCare has an “AA-” rating and stable outlook with Fitch. The health system has a leading market share in a stable service area and strong operating performance, according to Fitch.

 

 

Outlook is negative for nonprofit hospital sector, Moody’s says

https://www.beckershospitalreview.com/finance/outlook-is-negative-for-nonprofit-hospital-sector-moody-s-says.html

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Moody’s Investors Service has issued a negative outlook on the nonprofit healthcare and hospital sector for 2019. The outlook reflects Moody’s expectation that operating cash flow in the sector will be flat or decline and bad debt will rise next year.

Moody’s said operating cash flow will either remain flat or decline by up to 1 percent in 2019. Performance will largely depend on how well hospitals manage expense growth, according to the credit rating agency.

Moody’s expects cost-cutting measures and lower increases in drug prices to cause expense growth to slow next year. However, the credit rating agency said expenses will still outpace revenues due to several factors, including the ongoing need for temporary nurses and continued recruitment of employed physicians.

Hospital bad debt is expected to grow 8 to 9 percent next year as health plans place greater financial burden on patients. An aging population will increase hospital reliance on Medicare, which will also constrain revenue growth, Moody’s said.

 

14 recent hospital, health system outlook and credit rating actions

https://www.beckershospitalreview.com/finance/14-recent-hospital-health-system-outlook-and-credit-rating-actions.html?origin=cfoe&utm_source=cfoe

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The following hospital and health system credit rating and outlook changes or affirmations occurred in the last week, beginning with the most recent:

1. Fitch affirms ‘AA-‘ rating for SSM Health

Fitch Ratings affirmed St. Louis-based SSM Health’s “AA-” issuer default rating and “AA-“/”F1+” rating where applicable on outstanding rated bonds.

2. Moody’s affirms Cook Children’s Medical Center’s ‘Aa2’ rating

Moody’s Investors Service affirmed its “Aa2” and “Aa2/VMIG 1” ratings for Fort Worth, Texas-based Cook Children’s Medical Center, affecting $356 million of outstanding revenue bonds.

3. Moody’s affirms ‘Baa2’ rating for Children’s Hospital Los Angeles

Moody’s Investors Service affirmed its “Baa2” rating for Children’s Hospital of Los Angeles, affecting $438 million of rated debt.

4. Moody’s affirms ‘A1’ rating for Lucile Packard Children’s Hospital

Moody’s Investors Service affirmed its “A1” revenue bond rating for Palo Alto, Calif.-based Lucile Packard Children’s Hospital.

5. Moody’s affirms ‘A2’ rating for Mary Greeley Medical Center

Moody’s Investors Service affirmed its “A2” rating for Ames, Ia.-based Mary Greeley Medical Center, affecting $64 million of outstanding revenue bonds.

6. Moody’s downgrades Marion County Health and Hospital to ‘Aa2’

Moody’s Investors Service downgraded Marion County (Ind.) Health and Hospital Corp.’s rating from “Aa1” to “Aa2.”

7. Moody’s assigns ‘A2’ rating to HonorHealth

Moody’s Investors Service assigned an “A2” rating to Scottsdale, Ariz.-based HonorHealth’s revenue bonds and affirmed its “A2” rating for the system’s outstanding parity debt.

8. Moody’s upgrades Gainesville Hospital District rating to ‘Ba1’

Moody’s Investors Service upgraded Gainesville (Texas) Hospital District issuer and general obligation limited tax debt ratings from “Ba2” to “Ba1.”

9. Moody’s downgrades Monroe County Health Care Authority rating to ‘Ba1’

Moody’s Investors Service downgraded Monroe County (Ala.) Health Care Authority’s rating from “A3” to “Ba1,” affecting $3.6 million in general obligation limited tax bonds.

10. Moody’s affirms ‘A2’ rating for MedStar Health

Moody’s Investors Service affirmed its “A2” rating on Columbia, Md.-based MedStar Health, affecting $1.4 billion of debt.

11. Moody’s assigns ‘A2’ rating to Mercy Health

Moody’s Investors Service assigned an “A2” rating to Cincinnati-based Mercy Health’s proposed taxable bond and also affirmed its “A2” and “A2/VMIG 1” ratings on the system’s outstanding bonds.

12. S&P revises Spartanburg Regional Health’s outlook to negative

S&P Global Ratings revised its outlook for Spartanburg (S.C.) Regional Healthcare System from stable to negative.

13. S&P affirms ‘A+’ rating for Rush University Medical Center

S&P Global Ratings affirmed its “A+” long-term rating for Chicago-based Rush University Medical Center’s outstanding revenue bonds.

14. S&P raises rating for Columbus Regional Healthcare to ‘A+’

S&P Global Ratings raised its rating for Whiteville, N.C.-based Columbus Regional Healthcare System from “BBB-” to “A+.”

 

 

 

‘It remains to be seen’ whether acute care, nonprofit hospital profitability has peaked, Fitch says

https://www.beckershospitalreview.com/finance/it-remains-to-be-seen-whether-acute-care-nonprofit-hospital-profitability-has-peaked-fitch-says.html?origin=cfoe&utm_source=cfoe

Fitch Ratings has released a new report in response to questions from U.S. investors about whether acute care, nonprofit hospitals’ operating profitability has peaked or can be improved.

Four takeaways:

1. Fitch said acute care, nonprofit hospitals experienced across-the-board deterioration of operating margins in 2017, and the trend is expected to repeat this year. But acute care, nonprofit hospitals’ balance sheet metrics, such as days cash on hand, cash to debt and debt to capitalization, are at an all-time high.

2. Amid declining operating margins, large system providers plan to reduce costs and inefficiencies and are rethinking care delivery, according to Fitch Senior Director Kevin Holloran. He said smaller providers face greater challenges because they “are characteristically less able to trim expenses and typically unable to negotiate higher rates from commercial insurers in their markets.”

3. Fitch concluded: “It remains to be seen whether we are at a peak or if there is further room to improve.”

4. However, the ratings agency is certain of one thing: Nonprofit hospital systems will continue to consolidate. Fitch said investors have asked it whether increased size and scale through consolidation is advantageous as far as credit ratings.

“Size and scale are ‘better’ for a hospital’s rating if its enhanced size and scale means improved operations, stronger balance sheets and more market essentiality,” said Mr. Holloran.”Conversely, a hospital getting bigger just for the sake of getting bigger at times can lead to an initial dip in operating profitability as the two or more organizations come together.”

Access the full report here.

 

9 hospitals with strong finances

https://www.beckershospitalreview.com/finance/9-hospitals-with-strong-finances-110818.html

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

1. Wausau, Wis.-based Aspirus has an “AA-” rating and stable outlook with S&P. The health system has solid debt and liquidity metrics, according to S&P.

2. Charlotte, N.C.-based Atrium Health has an “AA-” rating and stable outlook with S&P. The health system has a strong operating profile, favorable payer mix, healthy financial performance and sustained volume growth, according to S&P.

3. St. Louis-based Mercy Health has an “Aa3” rating and stable outlook with Moody’s. The health system has favorable cash flow metrics, a solid strategic growth plan, a broad service area and improving operating margins, according to Moody’s.

4. Traverse City, Mich.-based Munson Healthcare has an “AA-” rating and positive outlook with Fitch. The health system has a leading market share in a favorable demographic area and a healthy net leverage position, according to Fitch.

5. Parkview Regional Medical Center in Fort Wayne, Ind., has an “AA-” rating and stable outlook with S&P. The hospital is executing on its strategic plan, and S&P expects it to maintain its balance sheet metrics.

6. Vancouver, Wash.-based PeaceHealth has an “AA-” rating and stable outlook with Fitch. The health system has a leading market position, robust reserves and strong cash flow, according to Fitch.

7. Baltimore-based Johns Hopkins Health System has an “Aa2” rating and stable outlook with Moody’s. The health system has favorable liquidity metrics, strong fundraising capabilities, a healthy market position and regional brand recognition, according to Moody’s.

8. Madison-based University of Wisconsin Hospital and Clinics has an “Aa3” rating and stable outlook with Moody’s. The hospital has an integral relationship with the University of Wisconsin-Madison and is a major academic medical center and quaternary referral center for the region and state, according to Moody’s.

9. Willis-Knighton Medical Center in Shreveport, La., has an “AA-” rating and positive outlook with Fitch. The hospital has a leading inpatient market share, favorable payer mix and healthy operating margins, according to Fitch.

 

M&A, debt dampen US healthcare risk profile, report finds

https://www.healthcaredive.com/news/ma-debt-dampen-us-healthcare-risk-profile-report-finds/540922/

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Dive Brief:

  • Demand for healthcare products and services has helped to keep wind in the sales of U.S. healthcare companies, but continuing deal activity and increasing issuance of high-grade bonds to fund large strategic acquisitions and capital projects is causing credit ratings to trend south, Fitch Ratings reports
  • Regulatory changes, pricing pressures, pushes from activist investors and low interest rates will likely spark more horizontal mergers and acquisitions, as well as vertically integrated deals, according to the ratings agency.
  • “We view M&A and investor appetite for high quality paper, particularly during the late stages of the economic cycle, as major contributors to the risk in investment-grade bond issuance,” Fitch says. “However, prospects of enhanced cash flow generation and greater efficiencies of scale are not fully offsetting increased leverage and this is altering the long-term credit risk profile of the sector.”

Dive Insight:

Other pressures fueling healthcare M&A include technological innovation and consumer-centricity, according to a recent PwC report. The largest deal in the third quarter of 2018 was RCCH Healthcare Partner’s $5.6 billion purchase of LifePoint Health. The quarter also saw HCA Healthcare pick up Mission Health for $1.5 billion.

Overall, though, the quarter marked the fewest number of deals since the first quarter of 2017. Value of deals also declined compared to the same period the previous year.

The slowdown in M&A includes deals among hospitals and health systems. The third period saw just 18 deals, 38% fewer than the 29 in Q3 2017, according to Kaufman Hall. The turndown suggests providers are looking at options other than mergers and acquisitions to achieve strategic aims.

Over the past 10 years, the number of investment grade bonds in healthcare has been growing at an 18% compound annual growth rate, nearly tripling in size to $609 billion by the end of September, according to Fitch. Currently, 58% of those outstanding bonds in the sector have ratings in the BBB category, compared with 1% at the end of 2009.

Roughly half of all outstanding IG bonds in healthcare are held by 10 companies, including CVS Health and Cigna. CVS took out $40 billion in loans to help fund its $67.5 billion purchase of Aetna, resulting in an A/rating watch negative. Cigna issued $20 billion worth of bonds to help cover its $67 billion acquisition of Express Scripts. Cigna’s current credit rating is BBB/RWN.

Fewer than 10% of BBB-rated companies have a BBB/negative rating. Among those are two medtech companies, Becton Dickinson and Bio-Rad Laboratories.

Fitch recently lowered Cardinal Health’s rating BBB+/negative to BBB/stable over concerns of higher than usual leverage following recent deal activity.

Moody’s Investor Services this year revised its outlook for the nonprofit and public hospitals sector from stable to negative. Moody’s warned facilities are “on an unsustainable path” due to high spending and low growth of revenues. 

 

12 recent hospital, health system outlook and credit rating actions

https://www.beckershospitalreview.com/finance/12-recent-hospital-health-system-outlook-and-credit-rating-actions-10-5-18.html?origin=cfoe&utm_source=cfoe

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The following hospital and health system credit rating and outlook changes or affirmations occurred in the last week, beginning with the most recent:

1. S&P assigns ‘AA+’ rating to OhioHealth‘s bonds
S&P Global Ratings assigned its “AA+” long-term rating to Columbus-based OhioHealth’s $125 million series 2018A and $50 million series 2018B. Concurrently, S&P assigned its “AA+/A-1+” dual rating to the health system’s $37.5 million series 2018C and $37.5 million series 2018D.

2. S&P assigns ‘AA-‘ long-term rating to Atrium Health‘s bonds
S&P Global Ratings assigned its “AA-” long-term rating to Charlotte, N.C.-based Atrium Health’s series 2018A-E bonds. Concurrently, S&P affirmed its “AA-” underlying rating on the health system’s existing bonds.

3. S&P revises Mercy Health Services‘ outlook to positive
S&P Global Ratings revised Baltimore-based Mercy Health Services outlook to positive from stable.

4. Fitch assigns ‘BBB+’ issuer rating to ProMedica
Fitch Ratings assigned its “BBB+” issuer default rating to Toledo, Ohio-based ProMedica. Concurrently, Fitch assigned its “BBB+” long term rating to ProMedica’s $300 million series 2018A bonds and $1.15 billion series 2018B taxable bonds.

5. Fitch upgrades St. Francis Healthcare System to ‘AA’
Fitch Ratings upgraded Cape Girardeau, Mo.-based St. Francis Healthcare System’s rating to “AA” from “AA-,” affecting $139.3 million of debt. Concurrently, Fitch assigned the health system its “AA” issuer default rating.

6. S&P downgrades South Georgia Medical Center‘s rating to ‘BBB+,’ assigns negative outlook
S&P Global Ratings downgraded its long-term rating on Valdosta, Ga.-based South Georgia Medical Center’s certificates to “BBB+” from “A-.”

7. Fitch assigns ‘A’ rating to Edward-Elmhurst Healthcare‘s bonds
Fitch Ratings assigned its “A” rating to Naperville, Ill.-based Edward-Elmhurst Healthcare’s series 2018 bonds, affecting about $249.74 million of debt. Concurrently, Fitch affirmed its “A” issuer default and revenue bond ratings.

8. S&P revises PeaceHealth‘s outlook to positive for improved operations
S&P Global Ratings affirmed its “A” long-term and underlying rating on Vancouver, Wash.-based PeaceHealth and assigned its “A” rating to the health system’s series 2018A bonds. Concurrently, the outlook was revised to positive from stable.

9. S&P revises SSM Healthcare‘s outlook to stable
S&P Global Ratings affirmed its “A+” long-term and underlying rating on St. Louis-based SSM Health. Concurrently, the outlook was revised to stable from negative.

10. S&P downgrades Crawford Memorial Hospital‘s rating to ‘BBB’
S&P Global Ratings downgraded Robinson, Ill.-based Crawford Memorial Hospital’s long-term and underlying rating to “BBB” from “A.”

11. S&P downgrades Lexington Medical Center to ‘A’ after error correction
S&P Global Ratings downgraded West Columbia, S.C.-based Lexington Medical Center’s series 2011, 2016 and 2017 revenue bonds to “A” from “A+.

12. S&P assigns ‘AA-‘ rating to Parkview Regional Medical Center
S&P Global Ratings assigned its “AA-” rating to Fort Wayne, Ind.-based Parkview Regional Medical Center’s series 2018 and 2019A bonds, affecting about $162 million of debt.