Earthquake regulations may rock S&P ratings for California hospitals

https://www.beckershospitalreview.com/finance/earthquake-resistance-regulations-may-rock-s-p-ratings-for-california-hospitals.html?origin=cfoe&utm_source=cfoe

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Achieving full compliance with rules to make their facilities operational after an earthquake by 2030 could strain ratings for many California acute care hospitals and health systems, S&P Global Ratings said in a new report.

California law requires hospitals to upgrade buildings to reduce their risk of collapse during earthquakes by 2020 and to remain operational after an earthquake occurs by 2030. The 2030 rules include structural and nonstructural components.

S&P said most organizations have met the 2020 seismic compliance deadline, but many will face challenges as they invest in achieving full seismic compliance by 2030.

“As many rated California providers invest in the next round of compliance, they will have ongoing capital expenditures, although for some organizations it will likely be less than the updates leading up to the 2020 deadline,” the ratings agency wrote. “Nevertheless, many will face mandated capital spending that will compete with other strategic priorities, and many will face potential operating challenges related to making nonstructural updates while minimizing patient care disruption.”

S&P — which based its analysis on more than 40 rated California-based acute care hospitals and health systems as of Dec. 31, 2018 — said it believes most of the California hospitals and health systems it rates, especially those with higher ratings, should be able to absorb the capital spending and operating expenses related to achieving full seismic compliance by 2030.

However, full compliance by 2030 could be difficult for providers with lower ratings that already have challenges related to accessing capital at a reasonable cost, said S&P.

“Moreover, the additional potentially prohibitive costs for this next round of compliance needs, combined with ongoing industry pressures, could contribute to some shifting strategies, such as mergers and acquisitions, rebalancing of strategic priorities, and potentially closures for those hospitals without the means to finance the project and absorb increased expenses,” the agency wrote.

Access S&P’s full report here.

 

 

When the cycle turns: Healthcare Subsectors Ranked by Vulnerability to Economic Downturn

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S&P: Hospitals vulnerable to recession as healthcare sector stays defensive

The healthcare sector remains defensive but has become increasingly vulnerable to an economic downturn because of deteriorating ratings, comparatively higher leverage and greater industry disruption, analysts at S&P Global Ratings said in a new report.

Healthcare companies’ issuer credit ratings are becoming more vulnerable to a cyclical downturn in comparison to prior recessions, according to the rating agency, which also said that proposals from the U.S. government are threatening the sector’s creditworthiness.

Credit quality has fallen considerably since the last recession in the healthcare sector — where products and services continue to show a largely inelastic demand — with 66% of healthcare companies carrying B ratings, according to the April 29 analysis.

Ratings estimates that about 20% of for-profit healthcare companies have investment-grade issuer credit ratings, in comparison to 54% in 2005. The rating agency believes this transition shows an increase in smaller and mainly private equity-owned healthcare issuers.

Hospitals among subsectors most vulnerable to economic slowdown

The subsectors most vulnerable to an economic downturn are hospitals, healthcare service providers and hospital staffing services, based on leverage metrics and relatively higher disruption in comparison to other subsectors, the rating agency added.

Ratings analysts said companies like Tenet Healthcare Corp., Prospect Medical Holdings Inc. and HCA Healthcare Inc. would be affected by a potential rise in uncompensated care — with patients opting for lower cost options — since insurance coverage tends to decline as unemployment rates increase during a recession. In addition, healthcare companies such as Acadia Healthcare Co. Inc. and WP CityMD Bidco LLC would be highly exposed to reimbursement rates based on Medicaid and Medicare plans.

The healthcare segment at highest risk in an economic downturn is temporary nurse staffing, which is highly sensitive to cyclicality, more so than part-time physician staffing and full-time employment.

Pharmacy benefit managers, often called the drug middlemen or PBMs, such as CVS Health Corp. and Aetna Health Holdings LLC, which are responsible for negotiating drug prices between drug companies and insurers are also at risk of exposure to a downturn.

The Trump administration wants to end the safe harbor protections, which permit PBMs to collect rebates, by Jan. 1, 2020, and move the U.S. to a fixed-fee discount model.

Ratings analysts believe healthcare companies with a portfolio of research and development, medical devices, pharmaceuticals and biologics manufacturing will be more insulated and can expect steady demand during a recession, which will help achieve astrong revenue base.

Companies like Pfizer Inc., Amgen Inc. and Teva Pharmaceutical Industries Ltd. may be at the receiving end of a slight shift in the sector, which will see customers increasingly preferring lower-cost generic and biosimilar alternatives. In addition, increased usage of high-deductible insurance plans will bolster switches to lower-cost options.

Life sciences companies like Danaher Corp., Thermo Fisher Scientific Inc. and PerkinElmer Inc. mostly see repeat sales of their products, and since there is an increase in the use of diagnostic tests, the life sciences subsector would be more resilient in an economic downturn.

Medical devices companies Baxter International Inc., Abbott Laboratories, Becton Dickinson and Co. and Hologic Inc. should expect consistent demand though there is some exposure to patient and hospital admission volumes.

However, Ratings analysts believe the medical devices subsector “does not have a large target on its back, in terms of cost control, versus the pharmaceutical industry.”

Given the mostly inelastic demand in the healthcare sector, McKesson Corp., Cardinal Health Inc., Owens & Minor Inc. and other such companies in the drugs and medical products’ distribution segment will be largely insulated from the economic downturn, Ratings analysts added.

 

 

 

 

9 hospitals with strong finances

https://www.beckershospitalreview.com/finance/9-hospitals-with-strong-finances-040819.html?origin=cfoe&utm_source=cfoe

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

1. South Bend, Ind.-based Beacon Health System has an “AA-” rating and stable outlook with Fitch. The health system has a strong financial profile, and is the acute care leader in its market, according to Fitch.

2. Los Angeles-based Cedars Sinai Medical Center has an “AA-” rating and stable outlook with Fitch. The hospital has a solid market presence in a competitive service area and strong profitability and liquidity, according to Fitch.

3. St. Cloud, Minn.-based CentraCare Health has an “AA-” rating and stable outlook with Fitch. The health system has a strong operating risk profile and a leading market position over a broad service area, according to Fitch.

4. Wauwatosa, Wis.-based Children’s Hospital and Health System has an “Aa3” rating and stable outlook with Moody’s. The health system has a strong financial profile and is the dominant provider of tertiary and quaternary pediatric services in southeastern Wisconsin, according to Moody’s.

5. Children’s Hospital of Philadelphia has an “Aa2” rating and stable outlook with Moody’s. The hospital has a strong market position and exceptional financial resources to support high capital needs, according to Moody’s.

6. Concord (N.H.) Hospital has an “AA-” rating and stable outlook with Fitch. The hospital has a strong financial profile and a leading market share position, according to Fitch.

7. Portland-based Oregon Health and Sciences University has an “Aa3” rating and stable outlook with Moody’s. The health system has solid operating performance, strong clinical offerings and includes the only academic medical center in Oregon, according to Moody’s.

8. Clermont, Fla.-based South Lake Hospital has an “AA-” rating and stable outlook with Fitch. The hospital’s operating performance has improved in recent years due to its partnership with Orlando (Fla.) Health, according to Fitch.

9. Iowa City-based University of Iowa Hospitals & Clinics has an “Aa2” rating and stable outlook with Moody’s. The system’s strong brand and position as the only academic medical center in Iowa will continue to translate into strong market share and high patient demand, according to Moody’s.

 

12 health systems with strong finances

https://www.beckershospitalreview.com/finance/12-health-systems-with-strong-finances-031219.html

 

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.

1. Dallas-based Baylor Scott & White Health has an “Aa3” rating and stable outlook with Moody’s. The health system has strong cash flow margins, and its favorable demographics will contribute to volume and revenue growth, according to Moody’s.

2. Newark, Del.-based Christiana Care has an “Aa2” rating and stable outlook with Moody’s. The health system has solid margins and a robust balance sheet, according to Moody’s.

3. 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.

4. Chicago-based Northwestern Memorial HealthCarehas an “Aa2” rating and stable outlook with Moody’s. Moody’s expects that the health system’s operating model and comprehensive IT systems will enable it to execute growth strategies while maintaining strong margins.

5. Winston-Salem, N.C.-based Novant Health has an “Aa3” rating and stable outlook with Moody’s. The credit rating agency expects Novant to continue generating strong cash flow margins in favorable markets.

6. Boston-based Partners 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 an excellent reputation in the clinical and research spaces, a long track record of fundraising, and adequate balance sheet measures, according to Moody’s.

7. 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.

8. 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.

9. Cincinnati-based TriHealth has an “AA-” rating and stable outlook with Fitch. Fitch expects the health system to maintain good operating ratios, leading to liquidity growth.

10. Iowa City-based University of Iowa Hospitals & Clinics has an “Aa2” rating and stable outlook with Moody’s. The system’s strong brand and position as the only academic medical center in Iowa will continue to translate into strong market share and high patient demand, according to Moody’s.

11. York, Pa.-based WellSpan Health has an “AA-” rating and stable outlook with Fitch. The health system has a leading market position in south-central Pennsylvania and a strong financial profile, according to Fitch.

12. Yale New Haven (Conn.) Health has an “Aa3” rating and stable outlook with Moody’s. The health system has a leading market position in Connecticut, with a broad reach for tertiary and quaternary patients from throughout the state, and strong brand recognition, according to Moody’s.

 

 

20 recent hospital, health system outlook and credit rating actions

https://www.beckershospitalreview.com/finance/20-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 two weeks, beginning with the most recent:

1. Fitch upgrades Cottage Health rating to ‘AA-‘

Fitch Ratings assigned an issuer default rating of “AA-” to Santa Barbara, Calif.-based Cottage Health and upgraded its revenue bond rating from “A+” to “AA-.”

2. Moody’s assigns ‘A1’ rating to Bexar County Hospital District

Moody’s Investors Service assigned an “A1” rating to Bexar County (Texas) Hospital District.

3. Moody’s confirms ‘Ba1’ ratings for Monroe County Health Authority

Moody’s Investors Service confirmed its “Ba1” issuer and general obligation limited tax ratings for Monroe County (Ala.) Health Care Authority.

4. Moody’s affirms ‘A3’ rating for The Christ Hospital

Moody’s Investors Service has affirmed its “A3” rating for Cincinnati-based The Christ Hospital, affecting $311 million of outstanding debt.

5. Moody’s assigns ‘Aa3’ rating to Partners Healthcare System

Moody’s Investors Service assigned an “A3” rating to Boston-based Partners Healthcare’s proposed revenue bonds.

6. Moody’s affirms ‘Aa2’ rating for Northwestern Memorial HealthCare

Moody’s Investors Service affirmed its “Aa2,” “Aa2/VMIG 1,” and “P-1” ratings for Chicago-based Northwestern Memorial HealthCare, affecting $1.1 billion of debt.

7. Moody’s affirms Yale New Haven Health’s ‘Aa3’ rating

Moody’s Investors Service affirmed the long-term underlying “Aa3” ratings of Yale New Haven (Conn.) Health, affecting $715 million of rated debt.

8. Moody’s assigns ‘A2’ rating to Kettering Health Network

Moody’s Investors Service assigned an “A2” rating to Dayton, Ohio-based Kettering Health Network.

9. S&P assigns ‘A+’ rating to Indiana’s Marion General Hospital

S&P Global Ratings assigned an “A+” long-term rating to Marion (Ind.) General Hospital.

10. Moody’s affirms ‘Ba3’ rating for Antelope Valley Healthcare District

Moody’s Investors Service affirmed its “Ba3” rating for Lancaster, Calif.-based Antelope Valley Health District, which includes Antelope Valley Hospital, affecting $122 million of revenue bonds.

11. Moody’s affirms ‘Ba2’ rating for Community Memorial Health System

Moody’s Investors Service affirmed Ventura, Calif.-based Community Memorial Health System’s “Ba2” rating, affecting $339 million of rated debt.

12. Moody’s affirms ‘A2’ rating for University of Maryland Medical System

Moody’s Investors Service affirmed its “A2” rating for the Baltimore-based University of Maryland Medical System, affecting $1.1 billion of outstanding debt.

13. Moody’s affirms ‘B1’ rating for Sauk Prairie Healthcare

Moody’s Investors Service affirmed its “B1” rating for Sauk Prairie Healthcare in Prairie du Sac, Wis., affecting $38 million of fixed rate bonds.

14. Moody’s affirms ‘A3’ rating for Excela Health

Moody’s Investors Service affirmed Greensburg, Pa.-based Excela Health’s “A3” rating, affecting $72 million of outstanding debt.

15. Moody’s affirms Northwest Community Hospital’s ‘A2’ rating

Moody’s Investors Service affirmed its “A2” rating for Arlington Heights, Ill.-based Northwest Community Hospital, affecting $194 million of rated debt.

16. Fitch assigns ‘AA-‘ long-term rating to Trinity Health

Fitch Ratings assigned an “AA-” long-term rating to Livonia, Mich.-based Trinity Health, affecting $175 million of bonds.

17. Fitch withdraws rating for Greenwich Hospital

Fitch Ratings has withdrawn its issuer default rating for Greenwich (Conn.) Hospital.

18. Fitch assigns ‘A’ rating to East Tennessee Children’s Hospital

Fitch Ratings has assigned an “A” rating and an “A” issuer default rating to Knoxville-based East Tennessee Children’s Hospital.

19. Moody’s affirms ‘A1’ rating for Lexington County Health Services District

Moody’s Investors Service affirmed its “A1” rating for Lexington County (S.C.) Health Services District, affecting $369 million of outstanding revenue bonds.

20. Moody’s assigns ‘A1’ rating to Munson Healthcare

Moody’s Investors Service assigned an “A1” long-term rating to the proposed revenue refunding bonds for Traverse City, Mich.-based Munson Healthcare while also maintaining an “A1” rating on the system’s existing debt.

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.

 

 

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+.”