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.

CHS shares sink to new low

https://www.beckershospitalreview.com/finance/chs-shares-sink-to-new-low-100518.html

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Shares of Franklin, Tenn.-based Community Health Systems closed Oct. 4 at $2.67, their lowest closing price ever and down 1.1 percent from the day prior.
The hospital chain’s stock price traded as low as $2.62 on Oct. 4 after closing Oct. 3 at $2.70 per share. Over the past year, CHS shares have traded between $2.62 and $7.62.

CHS saw its net loss shrink in the second quarter of 2018 as the company continued to refine its hospital portfolio. The company is using proceeds from the hospital divestitures to pay down its debt load.

 

15 health systems with strong finances

https://www.beckershospitalreview.com/finance/15-health-systems-with-strong-finances-100418.html

Here are 15 health systems with strong operational metrics and solid financial positions, according to recent reports from Moody’s Investors Service and Fitch 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. 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.

3. Atrium Health has an “Aa3” rating and stable outlook with Moody’s. The Charlotte, N.C.-based health system has historically stable operating performance and solid cash-flow metrics, according to Moody’s.

4. Prince Frederick, Md.-based Calvert Health System has an “AA-” rating and stable outlook with Fitch. The system has a leading market share, a favorable payer mix and stable cash flow, according to Fitch.

5. Children’s Healthcare of Atlanta has an “Aa2” rating and stable outlook with Moody’s. The health system has a dominant market position, strong margins and ample liquidity, according to Moody’s.

6. Cleveland Clinic has an “Aa2” rating and stable outlook with Moody’s. Cleveland Clinic has strong brand recognition, exceptional fundraising ability and healthy cash flow, according to Moody’s.

7. 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.

8. Philadelphia-based Main Line Health has an “Aa3” rating and stable outlook with Moody’s. The system has a strong market position, healthy balance sheet metrics and a light debt burden, according to Moody’s.

9. Rochester, Minn.-based Mayo Clinic has an “Aa2” rating and stable outlook with Moody’s. Mayo has a strong clinical reputation, favorable fundraising capabilities and a robust balance sheet, according to Moody’s.

10. Dallas-based Methodist Health System has an “Aa3” rating and stable outlook with Moody’s. The health system has a favorable liquidity position, consistent operating results and a growing market population, according to Moody’s.

11. Omaha-based Nebraska Medicine has an “AA-” rating and stable outlook with Fitch. The system has strong operating margins and a light debt burden, according to Fitch.

12. Fort Wayne, Ind.-based Parkview Health System has an “Aa3” rating and stable outlook with Moody’s. The system has healthy debt service coverage, manageable capital spending and improving liquidity metrics, according to Moody’s.

13. Sisters of Charity of Leavenworth (Kan.) Health System, which does business as SCL Health, has an “Aa3” rating and stable outlook with Moody’s. The system has a good market position in a favorable service area, strong operating margins and limited capital spending, according to Moody’s.

14. Hollywood, Fla.-based South Broward Hospital District has an “Aa3” rating and positive outlook with Moody’s. The health system has a dominant market position, robust debt coverage and improving operating margins, according to Moody’s.

15. Chapel Hill-based University of North Carolina Hospitals has an “Aa3” rating and stable outlook with Moody’s. The health system has an excellent market position, strong patient demand and healthy financial performance, according to Moody’s.

 

 

 

Dignity Health’s net income more than doubles

https://www.beckershospitalreview.com/finance/dignity-health-s-net-income-more-than-doubles.html

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Dignity Health, a 40-hospital system based in San Francisco, saw its financial position improve in fiscal year 2018 as it booked higher revenue and benefited from a one-time payment related to a transaction that closed earlier this year.

Dignity recorded revenues of $14.2 billion for the year, which ended June 30, compared with revenues of $12.9 billion for fiscal 2017, according to recently released financial documents

In fiscal 2017, Dignity and other California healthcare providers struggled with loss of funds from the state’s provider-fee program, which is designed to help hospitals and health systems treat a large number of indigent patients. The program levies a tax on hospitals, and the state then pools funds to receive federal matches for Medicaid dollars. The Medicaid dollars are distributed back to hospitals based on the number of indigent patients they treat.

In November 2016, California’s participation in the provider-fee program was made permanent with the passage of Proposition 52. However, CMS did not approve the first iteration of the program, which covers the period from Jan. 1, 2017, to June 30, 2019, until December 2017. Accordingly, Dignity’s financial statements for fiscal year 2018 include $447 million in provider-fee payments for the most recent fiscal year plus an additional $217 million of catch-up related to fiscal 2017.

Although the provider-fee payments helped improve Dignity’s financial picture, the system said its unpaid Medi-Cal costs totaled $556 million even after the inclusion of the provider-fee and supplemental payments.

After factoring in expenses, which climbed 6 percent year over year, Dignity ended fiscal 2018 with operating income $529.3 million. That’s compared to fiscal 2017, when the system recorded an operating loss of $66.8 million. The system’s net income more than doubled year over year to $932.5 million.  

During fiscal 2018, Dignity’s financial position was boosted by a one-time gain of $120 million related to a deal with Mechanicsburg, Pa.-based Select Medical to combine occupational medicine and urgent care businesses. Under the transaction, which closed in February, Select Medical’s Concentra Group Holdings and Dignity’s U.S. HealthWorks combined.

Daniel Morissette, Dignity Health’s senior executive vice president and CFO, said several of the system’s balance sheet-related financial metrics also improved in fiscal 2018.

“Our balance sheet continued to strengthen, and cash flows were solid, as we remain focused on further enhancing the long term financial viability of our enterprise and honoring our commitments to the many communities and constituents we serve,” he said in a press release.

 

Fitch: Nonprofit hospital balance sheet metrics improve, operating margins don’t

https://www.beckershospitalreview.com/finance/fitch-nonprofit-hospital-balance-sheet-metrics-improve-operating-margins-don-t.html

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U.S. nonprofit hospitals continue to struggle with operating margins, but key balance sheet metrics have improved, according to Fitch Ratings.

Fitch’s 2018 hospital median report, based on audited 2017 data, shows operating margins declined for the second consecutive year in every rating category. The 2017 median operating margin was 1.9 percent compared to 2.8 percent in 2016.

But the agency said key balance sheet metrics, such as days cash on hand, cash to debt and leverage, got better and are at all-time highs. For example, the median days cash on hand climbed from 195.5 in 2016 to 213.9 in 2017, and cash to debt increased to 159 percent from 142.8 percent year over year.
“Despite this apparent contradiction — which may be temporary in nature — the clear signal through the noise is that operating margins remain under pressure for the second year in a row, indicating ongoing stress in the sector,” Fitch said.

The agency said the ongoing operating margin struggles are attributable to salary and wage expense pressures, increasing pharmaceutical costs, and the shift from fee-for-service to value-based care.

Fitch finalized rating criteria changes for nonprofit hospitals revenue debt in January, which focus more on balance sheet strength compared to operating profitability. Even with declining operating margins, Fitch said its median rating for nonprofit hospitals remains ‘A.”

But “should operational pressures continue for an extended period of time, even strong balance sheets will begin to come under pressure,” said Fitch Senior Director Kevin Holloran.

 

 

Temple University Health System’s finances improve as Epic install costs shrink

https://www.beckershospitalreview.com/finance/temple-university-health-system-s-finances-improve-as-epic-install-costs-shrink.html

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Philadelphia-based Temple University Health System saw its financial position improve in the 12 months ended June 30, according to recently released unaudited financial documents.

The health system reported revenues of $1.84 billion in fiscal year 2018, up from $1.75 billion in the year prior. The increase was attributable in part to higher net patient service revenue. Temple said inpatient revenue grew year over year due to increased acuity and improved payer mix at Temple University Hospital, and that higher outpatient revenue was attributable to growth of TUH’s outpatient pharmacy and higher outpatient volumes.

The health system’s operating expenses climbed 4.7 percent year over year to $1.83 billion in fiscal year 2018. Higher expenses related to supplies, pharmaceuticals, salaries and faculty support primarily drove the growth. However, those expenses were partially offset by lower costs attributed to TUH’s implementation of the Epic EHR system that took place in fiscal year 2017. The health system said it spent $15.1 million in fiscal 2017 on staffing needs related to the Epic go-live.

The health system ended the most recent fiscal year with operating income of $17.23 million, compared to operating income of $471,000 in the year prior, according to the financial documents.

 

Sutter’s operating income surges 806% in first half of 2018

https://www.beckershospitalreview.com/finance/sutter-s-operating-income-surges-806-in-first-half-of-2018.html

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Sacramento, Calif.-based Sutter Health saw revenues and operating income increase in the six months ended June 30, according to recently released unaudited financial documents.

Here are four things to know:

1. The health system reported operating revenues of $6.3 billion in the first six months of 2018, up 6.5 percent from revenues of $5.9 billion in the same period a year earlier. Sutter said the increase was primarily attributable to higher patient service revenues and premium revenues, which climbed 5.3 percent and 11.3 percent year over year, respectively.

2. Sutter’s operating expenses climbed 4.3 percent year over year to $6.1 billion in the six months ended June 30.

3. Sutter ended the first half of 2018 with operating income of $145 million, up 806 percent from $16 million in the same period of 2017. The health system’s operating margin increased from 0.3 percent in the first half of 2017 to 2.3 percent in the first six months of 2018.

4. After factoring in investment income, which declined due to a drop in value of certain securities and debt extinguishment, Sutter’s net income was $174 million in the first six months of this year, compared to $350 million in the same period a year earlier.