Here are 10 acute-care hospitals and health systems with strong operational metrics and solid financial positions, based on reports from Moody's Investors Service, Fitch Ratings and Standard & Poor's Ratings Services in the past month.
Hospitals and health systems are ordered by when the rating agency released its report, starting with the most recent.
1. FirstHealth of the Carolinas in Pinehurst, N.C., has an "AA" rating with Fitch. The multihospital network posted a 9.3 percent operating EBITDA margin in 2013, as well as 280 days cash on hand and a 31x cushion ratio. FirstHealth's "robust liquidity" comes despite the system's high exposure to Medicare and Medicaid (70 percent of gross revenue in 2013). FirstHealth controls 54.7 percent of its six-county market area.
2. John C. Lincoln Health Network in Phoenix received a credit boost from S&P last month, as the two-hospital system now holds an "A-" rating. S&P credit analyst Geraldine Poon said the upgrade was due largely to the creation of Scottsdale Lincoln Health Network. JCL and Scottsdale (Ariz.) Healthcare combined operations last August to create the new parent company. S&P also said JCL had a strong management team, a good financial track record and a growing market presence in north Phoenix.
3. Moody's upgraded the credit rating of Community Medical Centers, a three-hospital system based in Fresno, Calif., to "Baa1" last month. Moody's analysts attributed the upgrade to CMC's dominant market position in Fresno and its rising operating performance. CMC has more than $1 billion in annual revenue with 53,000 admissions. The system controlled about 55 percent of the Fresno region's acute-care discharges in 2012. Advisers also credited CEO Tim Joslin, CFO Stephen Walter and the entire management team that has led a "significant turnaround" in the past decade.
4. Children's Hospital of Philadelphia has an "Aa2" credit rating with Moody's, and analysts recently said the hospital has far more strengths than challenges. For example, CHOP ended 2013 with 357 days cash on hand, and its operating cash flow margins consistently exceed 15 percent. According to Moody's, CHOP is the largest independent pediatric hospital in the nation, netting more than $2 billion in revenue every year thanks to annual revenue growth of 7 percent.
5. Kaiser Permanente, a 38-hospital integrated delivery network based in Oakland, Calif., has an "A+" rating from Fitch on its $7.7 billion of revenue bonds. Last month, Fitch analysts praised the network for its unique business model, massive scale, largest market share and strong overall financial profile. The agency also wrote that Kaiser's "vertically integrated, fully aligned HMO model is well-positioned for the transition to a value-based healthcare environment." Kaiser stands as one of the largest nonprofit health systems in the country with $53.1 billion of operating revenue in 2013. The system posted a 3.1 percent operating margin last year, as well.
6. Fitch upgraded the credit rating of University of Colorado Health in Aurora to "AA-" from "A+" due to the new system's strong integration effort and improved financial performance in 2013. Moody's also affirmed the organization's "A1" rating. UCHealth ended last year with a 9.4 percent operating margin, 266 days cash on hand, a 21.8x cushion ratio and a 5.1x maximum annual debt service coverage. The five-hospital system, which includes 1,507 licensed beds, has successfully integrated its various IT systems, and Fitch analysts expect the academic system to continue to benefit from its growing brand and service area.
7. Texas Children's Hospital in Houston holds an "Aa2" rating from Moody's, and the rating agency recently noted the hospital has a lot of credit positives in its favor. The hospital completed its Epic electronic health record installation, and outpatient volumes across the organization are up. Texas Children's had 306 days cash on hand at the end of FY 2013 and continues to be among the top children's hospitals for fundraising.
8. Fairbanks (Alaska) Memorial Hospital, part of Phoenix-based Banner Health, holds an "A" rating from Fitch. Banner operates the leased land, an arrangement Fitch analysts say "has been fruitful for both parties." The 152-bed Fairbanks Memorial is a dominant provider in the area and increased its operating margin to 5.9 percent in fiscal year 2013. Its 16.6 percent operating EBITDA margin and 376 days cash on hand are also well above "A" category medians. Fairbanks Memorial is building a new surgical tower, set to open in 2017, which Fitch experts believe will bring "improved revenue growth opportunities."
9. S&P raised the long-term rating on Raleigh, N.C.-based Rex Healthcare's bonds to "AA-" last month. S&P credit analyst Jennifer Soule said Rex has become a "strategically important subsidiary" of UNC Health Care in Chapel Hill, N.C. Rex holds a leading market share in its highly competitive county. Even though Rex's financial performance is expected to dip in 2014 due to large investments in a new electronic health record system, S&P analysts said they expect the 660-bed system will "rebound quickly in fiscal 2015."
10. Amidst the dominant providers in a crowded Brooklyn, N.Y., market sits New York Methodist Hospital, which recently received a positive outlook from Moody's. Analysts said NYM, which is a member of NewYork-Presbyterian Healthcare System and affiliated with the Weill Cornell Medical College, both based in Manhattan, has posted increases in patient volumes every year since 1989 — a feat few other hospitals can claim. The hospital also has a "well-funded" pension plan, according to Moody's.
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