Tag Archives: Fitch

Nonprofit hospitals ‘on an unsustainable path,’ Moody’s says

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https://www.healthcaredive.com/news/nonprofit-hospitals-on-an-unsustainable-path-moodys-says/531245/

Dive Brief:

  • Not-for-profit and public hospitals spent more than they gained in revenues for the second consecutive year in fiscal 2017, according to Moody’s Investors Service.
  • Moody’s said the widening gap leaves facilities “on an unsustainable path” and will remain the largest strain on nonprofits through next year.
  • Median annual expense growth decreased to 5.7% in 2017 from 7.1%. That’s compared to annual revenue growth, which declined to 4.6% from 6.1%, according to Moody’s analyst Rita Sverdlik.

Dive Insight:

Hospitals, especially nonprofit facilities, are facing difficult times. Morgan Stanley recently reported that about 18% of more than 6,000 hospitals studied were at a risk of closure or are performing weakly. About 8% of studied hospitals were at risk of closing and 10% were called “weak,” according to that report. 

For perspective, just 2.5% of hospitals closed over the past five years.

What’s in store for hospitals in the near term depends on the specific outlook. Moody’s this year revised its outlook for the sector from stable to negative. That move followed nonprofit hospitals seeing more credit downgrades in 2017.  

On the other hand, Fitch Ratings recently called off its “Rating Watch” for U.S. nonprofit hospitals and health systems after the organizations showed improved or stable results this year.

So, there are signs of improvement in the sector, but challenges with revenues, sagging reimbursements and lower admissions will continue to plague hospitals.

The reasons Moody’s gave for lower revenue growth came from lower reimbursements, the shift to outpatient care, increased M&A activity and additional ambulatory competition. It said the move away from inpatient to outpatient moved into its fifth year.

“Reversing sluggish volume trends and growing profitable service lines will be critical to improving the sector’s financial trajectory over the near-term as most hospitals continue to operate in a fee-for-service environment,” Sverdlik said.

Moody’s added that more hospitals reported operating deficits in 2017. That coincided with lower absolute operating cash flow. It said 28.4% of nonprofit hospital experienced operating losses, an increase from 16.5% in 2016. Also, 59% of providers reported lower absolute operating cash flow, which was more than double the 24% noted in 2015. The 2017 figure was the highest percentage in five years.

Don’t expect times to get better any time soon. Moody’s said nonprofit hospital margins will continue to remain thin through this year. Margins have fallen to an all-time low of 1.6% operating and 8.1% of operating cash flow.

“Margin pressures led to softened debt coverage ratios, though the median growth rate of total debt has been negative over the last five years,” Sverdlik said. “Ongoing operating pressures will constrain the ability to reverse these trends, especially if providers turn to debt to fund capital needs.”

However, it’s not all bad news. Moody’s said the medians have shown positive signs. For instance, median unrestricted cash and investments growth rate improved to 8.9% thanks to strong market returns and steady capital spending. Also, absolute cash growth exceeded expenses growth, which caused improved median cash on hand. That trend isn’t expected to continue if hospitals spend more cash flow on capital or if equity markets fall.

 

 

15 recent hospital, health system outlook and credit rating actions

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https://www.beckershospitalreview.com/finance/15-recent-hospital-health-system-outlook-and-credit-rating-actions-8-3-18.html

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

1. S&P downgrades Westchester County Health Care to ‘BBB-‘
S&P Global Ratings downgraded Valhalla, N.Y.-based Westchester County Health Care’s revenue and refunding bonds to “BBB-” from “BBB.”

2. S&P revises UAB Medicine’s outlook to negative over weaker operations
S&P Global Ratings revised Birmingham, Ala.-based UAB Medicine’s outlook to negative from stable.

3. S&P upgrades Torrance Memorial Medical Center’s rating to ‘A’
S&P Global Ratings upgraded its long-term and underlying rating on Torrance (Calif.) Memorial Medical Center’s outstanding debt to “A” from “BBB.”

4. Moody’s affirms ‘A1’ rating on ProHealth Care
Moody’s Investors Service affirmed its “A1” rating on Waukesha, Wis.-based ProHealth Care, affecting $181 million of outstanding debt.

5. Moody’s assigns ‘Baa1’ to Baptist Healthcare System’s bonds
Moody’s Investors Service assigned its “Baa1” rating to Louisville-based Baptist Healthcare System’s proposed $130 million series 2018A revenue refunding bonds. At the same time, Moody’s upgraded the health system’s parity debt to “Baa1” from “Baa2,” affecting $442 million of debt.

6. S&P assigns ‘BBB+’ rating to CHI’s bonds
S&P Global Ratings assigned its “BBB+” long-term rating on Englewood, Colo.-based Catholic Health Initiatives’ proposed $275 million series 2018A bonds.

7. S&P places Essentia Health on credit watch negative
S&P Global Ratings placed its “A” underlying rating on Duluth, Minn.-based Essentia Health on credit watch with negative implications.

8. S&P revises Halifax Hospital Medical Center’s outlook to negative over litigation risks
S&P Global Ratings affirmed its “A-” long-term rating on Daytona Beach, Fla.-based Halifax Hospital Medical Center’s revenue bonds and revised the outlook to negative from stable.

9. Fitch assigns ‘AA’ IDR to Advocate Aurora Health
Fitch Ratings assigned an issuer default rating of “AA” to Advocate Aurora Health — the entity formed by the recent merger of Downers Grove, Ill.-based Advocate Health Care and Milwaukee-based Aurora Health.

10. Fitch affirms Nebraska Medicine’s ‘AA-‘ rating
Fitch Ratings affirmed its “AA-” rating on Omaha-based Nebraska Medicine’s outstanding bonds. Concurrently, Fitch assigned its “AA-” issuer default rating to the academic healthcare provider.

11. Fitch affirms ‘AA’ rating on Presbyterian Healthcare
Fitch Ratings affirmed its “AA” rating of Albuquerque, N.M.-based Presbyterian Healthcare Services’ outstanding bonds, affecting $850 billion of debt. At the same time, Fitch assigned its “AA” issuer default rating to the health system.

12. Moody’s affirms ‘Aa3’ rating on Main Line Health
Moody’s Investors Service affirmed its “Aa3” rating on Philadelphia-based Main Line Health’s outstanding bonds, affecting $219.5 million of debt.

13. Moody’s downgrades Lafayette General Medical Center
Moody’s Investors Service downgraded its rating on Lafayette (La.) General Medical Center to “Baa2” from “Baa1,” affecting $147 million of rated debt.

14. Moody’s affirms SCL Health’s ‘Aa3’ rating
Moody’s Investors Service affirmed its “Aa3” long-term rating on Sisters of Charity of Leavenworth (Kan.) Health System, which does business as SCL Health. The rating affects about $1.2 billion of debt.

15. S&P ratings on ProMedica debt unchanged after HCR ManorCare acquisition
ProMedica’s acquisition of Toledo-based nursing home chain HCR ManorCare will not immediately affect its “A+” long-term ratings on the Ohio-based health system’s debt, according to S&P Global Ratings.

 

 

13 latest hospital credit rating downgrades

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https://www.beckershospitalreview.com/finance/13-latest-hospital-credit-rating-downgrades.html

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The following nine hospital credit rating downgrades occurred in the last month. They are listed below in alphabetical order.

1. Boone Hospital Center (Columbia, Mo.) — from “A” to “A-” (Fitch)

2. Dignity Health (San Francisco) — from “A” to “A-” (Fitch)

3. El Paso (Texas) County Hospital District — from “AA-” to “A-” (Fitch)

4. Infirmary Health System (Mobile, Ala.) — from “A-” to “BBB+” (S&P)

5. King’s Daughters Medical Center (Ashland, Ky.) — from “A-” to “BBB-” (Fitch)

6. Lafayette (La.) General Health System — from “A-” to “BBB+” (Fitch)

7. Lahey Health System (Burlington, Mass.) — from “A” to “BBB+” (Fitch)

8. Lexington Medical Center (West Columbia, S.C.) — from “A+” to “BB+” (Fitch)

9. MedStar Health (Columbia, Md.) — from “A” to “A-” (Fitch)

10. Parkland Health and Hospital System (Dallas) — from “AA” to “AA-” (S&P)

11. Spartanburg (S.C.) Regional Health Services District — from “A” to “BBB” (Fitch)

12. St. John’s Riverside Hospital (Yonkers, N.Y.) — from “BB-” to “B-” (S&P)

13. University Hospital (Newark, N.J.) — from “BBB” to “BB-” (Fitch)

With the slew of downgrades from Fitch, it is important to note that the agency updated its credit rating criteria Jan. 9, 2018, for U.S. nonprofit hospitals and health systems. Under the updated criteria, the credit agency places a heightened emphasis on leverage and liquidity ratios and also considers operating leases and net pension liabilities debt equivalents.

Fitch reviewed 138 credit ratings, or about half of its portfolio of hospitals and health systems, due to the criteria changes. During the review, 25 hospitals (about 9 percent) were downgraded. Fitch does not believe the slew of downgrades is indicative of a wider, downward trend.

 

CHI’s operating loss widens in Q3, but finances improve over longer term

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https://www.beckershospitalreview.com/finance/chi-s-operating-loss-widens-in-q3-but-finances-improve-over-longer-term.html

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Englewood, Colo.-based Catholic Health Initiatives saw its operating loss widen in the third quarter of fiscal year 2018, but the health system’s financial picture improved over the first nine months of the fiscal year.

CHI’s operating revenues declined from $3.8 billion in the third quarter of fiscal year 2017 to $3.7 billion in the third quarter of fiscal 2018. However, the health system’s expenses before restructuring also declined about 1.7 percent year over year to $3.7 billion in the third quarter of the current fiscal year.

After factoring in restructuring, impairment and other one-time costs, the system ended the third quarter of fiscal year 2018 with an operating loss of $35.3 million, compared to an operating loss of $17.2 million in the same period a year earlier. CHI said its operating EBIDA improved by nearly $80 million during the third quarter of fiscal year 2018 after adjusting for transactional gains and other items.

CHI launched a turnaround plan about three years ago, and the improvements the system has achieved under that plan are clear when looking at financial results for the first nine months of the current fiscal year. For the nine months ended March 31, CHI reported an operating loss of $114.7 million, which was a significant improvement from the nearly $344 million loss the system recorded in the same period of the year prior.

“We continue to see strong momentum that has played out in the current fiscal year,” said Dean Swindle, president of enterprise business lines and CFO of CHI, in an earnings release. “We have established a strong foundation through a performance-improvement plan stretching back nearly three years, and we expect that these positive results will continue throughout the rest of this fiscal year and well beyond as we become a truly high-performing health system.”

The three major rating agencies — Moody’s Investors Service, Fitch Ratings and S&P Global Ratings — have all recognized CHI’s progress in recent months with positive adjustment in their outlooks for the health system.

 

 

8 health systems with strong finances

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https://www.beckershospitalreview.com/finance/8-health-systems-with-strong-finances-122117.html

Here are eight health systems with strong operational metrics and solid financial positions, according to recent reports from Fitch Ratings, Moody’s Investors Service 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. Lincoln, Neb.-based Bryan Health has an “AA-” rating and stable outlook with Fitch. The system has a strong market position, healthy balance sheet metrics and growing patient volume, according to Fitch.

2. Mercy Health in Cincinnati has an “Aa3” rating and stable outlook with Moody’s and an “AA-” rating and stable outlook with S&P. The health system has solid debt service coverage and strong balance sheet metrics, according to Moody’s.

3. Chicago-based Northwestern Memorial HealthCare has an “Aa2” rating and stable outlook with Moody’s. The system has a prominent and growing market position in the Chicago region, a strong investment position, good margins and manageable leverage, according to Moody’s.

4. San Diego-based Sharp HealthCare has an “Aa3” rating and stable outlook with Moody’s. The system has strong balance sheet measures and a fundamentally stable and strong strategic position, according to Moody’s.

5. Stanford (Calif.) Health Care has an “Aa3” rating and stable outlook with Moody’s. The system has a strong market position as one of two major academic medical centers in the Bay Area, a reputation for clinical excellence and research, and is in a service area with strong population growth and high wealth levels, according to Moody’s.

6. Iowa City-based University of Iowa Hospitals & Clinics has an “Aa2” rating and stable outlook with Moody’s. The health system has a broad market with growing patient volumes and geographic reach for its high-acuity services, according to Moody’s.

7. Philadelphia-based University of Pennsylvania Health System has an “Aa3” rating and stable outlook with Moody’s. The system has a strong and growing market position, good liquidity, and a history of beating budgets and managing capital spending relative to operating performance, according to Moody’s.

8. Yale New Haven (Conn.) Health System has an “Aa3” rating and stable outlook with Moody’s. The system has a leading market position in Connecticut, solid liquidity, moderate capital needs and manageable leverage, according to Moody’s.

Fitch issues negative outlook for nonprofit hospitals: 4 things to know

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https://www.beckershospitalreview.com/finance/fitch-issues-negative-outlook-for-nonprofit-hospitals-4-things-to-know.html

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Fitch Ratings’ outlook on the nonprofit healthcare sector is negative for 2018, as the sector faces regulatory, political and competitive challenges.

Here are four things to know about Fitch’s outlook on the sector.

1. Fitch expects nonprofit hospitals and health systems’ profitability to continue to weaken over the next year. “Growth in Medicare and Medicaid volumes are weakening provider payer mixes at a time when providers are moving from volume-based reimbursement in greater numbers,” said Fitch Senior Director Kevin Holloran.

2. Fitch said several factors could adversely affect lower-rated hospitals’ operating performance in 2018, including growing pressure on salaries and continued erosion in payer mix.

3. The proposed tax overhaul bill, which would hamper nonprofit hospitals’ ability to issue tax-exempt revenue, could further pressure the industry, according to Fitch.

4. Although the nonprofit healthcare sector outlook is negative, Fitch maintained its stable outlook for ratings of healthcare issuers. “Fitch anticipates our revised criteria for the acute care sector will be published early next year, which should lead to an above-average, but still balanced, degree of rating movement during the year,” the debt rating agency said.

Fitch launches new tool that allows hospitals to assess financial flexibility

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https://www.beckershospitalreview.com/finance/fitch-launches-new-tool-that-allows-hospitals-to-assess-financial-flexibility.html

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Provider organizations face increased financial pressure as reimbursement models shift in the value-based care era. To keep pace with these trends, Fitch Ratings is updating its rating criteria for nonprofit hospitals and health systems.

The agency’s proposed rating criteria changes, which also apply to tax-supported hospital districts, include introduction of revenue defensibility, operating risk and financial profile rating factors as well as individual assessments for each of those factors. Fitch said risk factors such as debt structure will also play a role in rating assignments.

The new rating factors assess how prepared the organization is to handle cost pressures and the organization’s operating cost flexibility, among other things, according to Fitch.

“The rating criteria needed a refresh and forces us to think about what’s going on right now in healthcare,” says Kevin Holloran, a Dallas-based senior director with Fitch.

The rating agency does not expect to see widespread rating changes as a result of the proposed rating criteria changes. In fact, Fitch projects the proposed changes will affect less than 15 percent of the ratings covered by the criteria.

Fitch took feedback on its initial draft of proposed rating criteria changes up until Oct. 20. It will now incorporate feedback into a final draft and anticipates adopting the proposed rating criteria changes in December.

FAST

As part of the proposed rating criteria changes, the rating agency is launching the Fitch Analytical Sensitivity Tool, or FAST. The interactive tool measures the financial flexibility of healthcare organizations in various hypothetical stress scenarios. For instance, the tool can assess how changes in the overall U.S. economy/market cycle, such as a drop in property values or the gross domestic product, may affect a hospital’s financial picture. Additionally, the tool can assess a hospital’s potential sensitivity to margin decline in various stress scenarios such as issuing a significant amount of debt or facing increased market competition, according to Fitch.

“Ratings agencies are always accused of looking backward in the mirror, but we want [the organization] to look forward expressly. We thought we always did a good job with that, but there’s always room for improvement,” says Mr. Holloran.

FAST can also model growth and expense rates and subject them to stress or an unexpected negative event to see if a hospital’s credit remains stable, according to Mr. Holloran.

He explains, this is “not a forecast, but a reasonable scenario based on our input combined with the credit, or input based on historical performance.” Mr. Holloran also notes the model informs ratings but does not drive them.

The public can now look at a mockup of the model here. Mr. Holloran says the model is built, but it does not include every credit rating yet. Fitch will continue to add to the tool over time.

Once the agency’s proposed rating criteria changes are fully adopted, the FAST model will allow hospitals to look forward and stress test a rating.

Hospitals “could use it for scenario building and give them a guide for the metrics they want to focus on,” Mr. Holloran says. “We can tell them this is the criteria we’re focusing on and this is how you stack up.”

He added, “It’s a powerful [data visualization] tool and really drives the conversation.”

5 hospitals with strong finances

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http://www.beckershospitalreview.com/finance/5-hospitals-with-strong-finances-080117.html

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

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

1. Coral Gables-based Baptist Health South Florida has an “AA-” rating and stable outlook with S&P. The system maintained key balance sheet metrics and generated better-than-projected financial results in fiscal year 2016, according to S&P.

2. Carolinas HealthCare System has an “Aa3” rating and stable outlook with Moody’s. The Charlotte, N.C.-based system has a track record of good financial performance, strong balance sheet metrics and a large scope of operations with multiple hospitals. Moody’s expects Carolinas HealthCare System to maintain stable leverage metrics while continuing to generate financial results at current levels.

3. Children’s Healthcare of Atlanta has an “Aa2” rating and stable outlook with Moody’s. CHOA is a leading provider of high acuity pediatric care in the Atlanta area and has favorable leverage metrics and a track record of strong margins and liquidity, according to Moody’s.

4. Cleveland Clinic Health System has an “Aa2” rating and stable outlook with Moody’s. The system has a track record of meeting operating challenges to sustain strong cash flow, exceptional fundraising capabilities, strong liquidity and a growing ability to leverage an international brand into revenue diversification, according to Moody’s. The debt rating agency expects Cleveland Clinic to manage execution risks of multiple strategies, as demonstrated in the past.

5. Broomfield, Colo.-based SCL Health has an “AA-” rating and stable outlook with Fitch. The system’s operating performance improved in fiscal year 2015, and SCL has sustained those results, according to Fitch. The system has manageable capital needs in the near term, a stable liquidity position and geographic diversity, with 12 hospitals in five markets across three states.

 

9 recent hospital, health system outlook and credit rating actions

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http://www.beckershospitalreview.com/finance/9-recent-hospital-health-system-outlook-and-credit-rating-actions.html

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The following hospital and health system credit rating and outlook changes and affirmations took place in the last week, beginning with the most recent.

1. Fitch assigns ‘A+’ rating to Regional Health’s bonds
Fitch Ratings assigned an “A+” rating to Rapid City, S.D.-based Regional Health’s proposed $214.4 million series 2017 revenue bonds to be issued by the South Dakota Health & Educational Facilities Authority.

2. Moody’s downgrades Midland County Hospital District’s debt rating to ‘Aa3’
Moody’s Investors Service downgraded Midland (Texas) County Hospital District’s general obligation debt rating to “Aa3” from “Aa2,” affecting $101.1 million of general obligation debt.

3. Moody’s assigns ‘Baa3’ rating to SoutheastHealth’s bonds
Moody’s Investors Service assigned its “Baa3” rating to Cape Girardeau, Mo.-based SoutheastHealth’s proposed $86.9 million series 2017A and $6.29 million series 2017B revenue bonds, to be issued through the Industrial Development Authority of the County of Cape Girardeau and the Industrial Development Authority of Stoddard County. The bonds will mature in 2042.

4. Moody’s affirms ‘A1’ rating on Sarasota County Public Hospital District’s bonds
Moody’s Investors Service affirmed its “A1” rating on Sarasota (Fla.) County Public Hospital District’s outstanding bonds, affecting $192 million of debt.

5. S&P revises NorthShore University HealthSystem’s outlook to stable
S&P Global Ratings affirmed the “AA” rating on Evanston, Ill.-based NorthShore University HealthSystem’s series 2010 revenue refunding bonds, issued by the Illinois Finance Authority.

6. S&P upgrades HealthEast Care System’s bond rating to ‘A+’
S&P Global Ratings upgraded the rating to “A+” from “BBB+” on St. Paul, Minn.-based HealthEast Care System’s series 2017A bonds, issued by the Redevelopment Authority of the City of Saint Paul.

7. Moody’s assigns ‘A2′ rating to Fairview Health Services’ bonds
Moody’s Investors Service assigned its “A2” rating to Minneapolis-based Fairview Health Services proposed $197 million series 2017A revenue bonds to be issued through the Housing and Redevelopment Authority of the City of St. Paul, Minn. The bonds will be fixed rate and will mature in 2047.

8. Moody’s assigns ‘A3’ rating to North Valley Hospital’s bonds
Moody’s Investors Service assigned its “A3” to Tonasket, Wash.-based North Valley Hospital’s proposed $8.5 million unlimited tax general obligation refunding bonds. The expected sale date is Aug. 16.

9. Moody’s downgrades Lucile Packard Children’s Hospital’s credit rating
Moody’s Investors Service downgraded Palo Alto, Calif.-based Lucile Packard Children’s Hospital’s credit rating to “A1” from “Aa3.”

5 hospitals with strong finances

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http://www.beckershospitalreview.com/finance/5-hospitals-with-strong-finances-080117.html

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

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

1. Coral Gables-based Baptist Health South Florida has an “AA-” rating and stable outlook with S&P. The system maintained key balance sheet metrics and generated better-than-projected financial results in fiscal year 2016, according to S&P.

2. Carolinas HealthCare System has an “Aa3” rating and stable outlook with Moody’s. The Charlotte, N.C.-based system has a track record of good financial performance, strong balance sheet metrics and a large scope of operations with multiple hospitals. Moody’s expects Carolinas HealthCare System to maintain stable leverage metrics while continuing to generate financial results at current levels.

3. Children’s Healthcare of Atlanta has an “Aa2” rating and stable outlook with Moody’s. CHOA is a leading provider of high acuity pediatric care in the Atlanta area and has favorable leverage metrics and a track record of strong margins and liquidity, according to Moody’s.

4. Cleveland Clinic Health System has an “Aa2” rating and stable outlook with Moody’s. The system has a track record of meeting operating challenges to sustain strong cash flow, exceptional fundraising capabilities, strong liquidity and a growing ability to leverage an international brand into revenue diversification, according to Moody’s. The debt rating agency expects Cleveland Clinic to manage execution risks of multiple strategies, as demonstrated in the past.

5. Broomfield, Colo.-based SCL Health has an “AA-” rating and stable outlook with Fitch. The system’s operating performance improved in fiscal year 2015, and SCL has sustained those results, according to Fitch. The system has manageable capital needs in the near term, a stable liquidity position and geographic diversity, with 12 hospitals in five markets across three states.