21 Hospitals and Health Systems With Strong Finances

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Here are 21 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. Mayo Clinic, based in Rochester, Minn., issued $300 million of revenue bonds in late April, and Moody's reaffirmed the system's high "Aa2" credit rating. Moody's analysts said Mayo's finances are among the strongest of any system, thanks to its "excellent clinical reputation," strong patient demand, favorable payer mix and top-notch fundraising team. Mayo is in the process of transforming Rochester into a global medical hub and has consequently increased its debt.

2. Mercy Regional Health Center in Manhattan, Kan., earned a credit upgrade from S&P, to "A+" from "A", as the 150-bed hospital became a full member of Wichita, Kan.-based Via Christi Health in March. S&P analyst Karl Propst said Mercy Regional should continue to have "robust operating performance, sound balance sheet metrics, favorable quality metrics and historically acceptable payer mix" as it integrates with Via Christi, which is part of St. Louis-based Ascension Health.

3. Fitch upgraded the credit rating of Central Washington Hospital, a public-owned hospital in Wenatchee, Wash., from "BBB-" to "BBB" due to the hospital's "sustained solid financial performance." CWH created an affiliation with nearby Wenatchee Valley Medical Center in 2013. The new organization is Confluence Health and includes the 176-bed CWH, 20-bed Wenatchee Valley Hospital, 11 outpatient clinics and a major multispecialty physician clinic with more than 250 physicians. Fitch said the affiliation should continue to provide benefits to all providers involved.

4. Memorial Healthcare System, a six-hospital network based in Hollywood, Fla., is one of the largest public health systems in the country. Despite its safety-net status and high rates of government payers, S&P raised its outlook for Memorial to positive from stable. The "AA-" system has a "very strong balance sheet, dominant business position in its county, strong operating margins and financial benefit from diverse revenue sources," according to S&P.

5. Children's Medical Center of Dallas, staffed for 413 beds, is a preeminent provider of pediatric services in the Dallas and Plano, Texas, service areas. Fitch affirmed the hospital's "AA" credit rating as it has averaged an operating EBITDA margin of 15.6 percent since 2011 — far above the 11.8 percent median for "AA" credits. As of Dec. 31, Children's had 465.8 days of cash on hand and a cash-to-debt ratio of 321.9 percent. The hospital also has a 70 percent market share of high-acuity pediatric services in the Dallas region.

6. UnityPoint Health, based in West Des Moines, Iowa, holds an "AA-" rating from Fitch. The system operates 17 hospitals and more than 280 physician clinics throughout Iowa, Illinois and Wisconsin, and its recent acquisition of Meriter Health Services in Madison, Wis., will boost UnityPoint's revenue for 2014. In 2013, UnityPoint posted an operating EBITDA margin of 9.9 percent.

7. Small, standalone hospitals face significant financial pressures today, but according to Fitch, Peterson Regional Medical Center in Kerrville, Texas, is holding its own. In 2013, the 124-bed hospital, located about 60 miles northwest of San Antonio, produced "a very healthy" 21.9 percent EBITDA margin. PRMC recorded $101 million in operating revenue last year, and as of Feb. 28, the hospital had 394.5 days of cash on hand, far above its "BBB"-rated peers.

8. Lucile Packard Children's Hospital, the pediatric hub of Stanford University and Stanford Hospital & Clinics in Palo Alto, Calif., maintains high credit ratings from both Moody's and Fitch. In 2013, the 266-bed hospital posted a 12.7 percent operating margin and more than 250 days cash on hand. Lucile Packard Children's is in the middle of a $1.2 billion hospital expansion project that will add 149 beds and expand several service lines. The new facility is projected to open in the summer of 2017. Lucile Packard is starting its transition to an Epic electronic health record system, costing $98 million, and it is also in the process of finding a new CFO after Tim Carmack left in December.

9. Last month, Moody's assigned an "Aa2" credit rating to the $150 million bond issuance from Boston Children's Hospital. The high rating was bestowed for several reasons, according to Moody's analysts: Boston Children's holds national and international acclaim for its pediatric services, it has a "strong" balance sheet with more than $2.2 billion of unrestricted cash and investments, it has a well-funded defined benefit pension plan and it has a stable leadership.

10. Baptist Health Care in Pensacola, Fla., had its credit rating upgraded to "A3" from "Baa1" by Moody's last month. The four-hospital Baptist, which won the 2003 Malcolm Baldrige award, produced a 4 percent operating margin and 9.5 percent operating cash flow margin last year. Moody's analysts also said the system's "heavy emphasis on customer service engrained in its culture" has led to improved operating metrics despite major challenges, like Medicaid rate reductions, hurricanes and the BP oil spill from 2010.

11. It's rare for rating agencies to tout the finances of small providers and critical access hospitals, but it did so last month for Upland Hills Health in Dodgeville, Wis. The 25-bed critical access facility, which posted $46 million of revenue in 2013, has maintained "solid profitability" since 2008 — UHH's operating EBITDA margin has been higher than 15 percent on average each year since then. The hospital's affiliation with St. Louis-based SSM Health Care has also provided stability.

12. Rush University Medical Center holds an "A" rating from S&P in a competitive Chicago market, and it also recently had its credit outlook revised to positive from stable. S&P analyst Avanti Paul said Rush's investment in its new tower and campus have given the academic medical center a stronger "business and financial position." Rush has posted high operating metrics since its new butterfly-shaped patient tower, which is LEED Gold certified, opened in January 2012.

13. Nationwide Children's Hospital in Columbus, Ohio, opened a new patient tower in June 2012, increasing its operated beds to 519 from 451. This investment has helped cement Nationwide Children's as a dominant player in the market, according to Fitch. The hospital had a 93 percent market share of pediatric services in its primary service area in 2012, and in 2013, its operating margin increased to 8.9 percent.

14. Fitch recently affirmed the "AA-" bond rating for ThedaCare, a five-hospital system based in Appleton, Wis. ThedaCare's liquidity metrics (266.4 days cash on hand, 200.3 percent cash-to-debt ratio) are above average, and it has averaged a 3.1 percent operating margin during the past four years. Fitch analysts have highlighted ThedaCare's management team, which rigorously uses lean methodologies to keep expenses in line and cut out waste in the system.

15. Agnesian HealthCare, a three-hospital system based in Fond du Lac, Wis., holds an "A3" rating and positive outlook with Moody's. Agnesian has averaged an operating cash flow margin of 12.3 percent from 2011 through 2013. The system has also significantly enhanced its liquidity — from 2008 to the beginning of 2014, Agnesian has almost doubled its days of cash on hand from 116 to 224.

16. Beatrice (Neb.) Community Hospital, a 25-bed critical access hospital, is a "BB+" facility within Fitch's portfolio, and it has been performing well compared with other small hospital peers. In fiscal year 2013, BCH's operating margin was 4.2 percent, while its operating EBITDA margin topped 19 percent. Last year was the first full year of operations for BCH's replacement facility, and Fitch said the hospital has grown the medical staff, which has led to big gains in revenue.

17. San Diego-based Scripps Health has become a financial stalwart the past few years, and rating agencies have taken notice. S&P recently upgraded Scripps' rating to "AA" from "AA-" due to its "very strong financial profile, highlighted by consistently strong operating performance, robust cash flow and excellent unrestricted reserves," according to S&P analyst Kenneth Gacka. Fitch analysts have similarly praised Scripps' management team for exceeding budget targets "due to strong financial discipline." In 2013, Scripps posted a 7.3 percent operating margin, well beyond the 4.2 percent median of its "AA" peers.

18. Last summer, Downers Grove, Ill.-based Advocate Health Care added Advocate Sherman Hospital in Elgin, Ill., to its ranks, and the hospital has benefited from the integration thus far. Moody's upgraded Advocate Sherman's bond rating to "Baa1" to "Baa2" due largely to the transaction. Since last June, Advocate Sherman has generated higher admissions. Additionally, its operating cash flow margin as of Dec. 31 was "a healthy" 14 percent, according to Moody's.

19. BayCare Health System, based in Clearwater, Fla., holds strong ratings from several agencies: "Aa2" from Moody's and "AA" from Fitch. BayCare, which encompasses 12 acute-care hospitals with 3,343 licensed beds, posted a 7.2 percent operating margin and 14.7 percent operating EBITDA margin in FY 2013, both far above Fitch's "AA" rating category medians. The system also had 389 days of cash on hand and a 31.8 percent leading market share in a "highly competitive four-county area," according to Moody's. Through the first two months of 2014, Moody's said BayCare is ahead of its budget.

20. Tampa (Fla.) General Hospital is an independent, 1,018-bed academic medical center in an ultra-competitive part of Florida that includes BayCare, and according to Moody's, it is continuing to do well despite those challenges. TGH offers several exclusive tertiary and quaternary services (it has a Medicare case mix index of 2.05, one of the highest in Moody's hospital portfolio), which helped the hospital reach a 2.8 percent operating margin in 2013. TGH executives expect to hit a 3.1 percent margin this year. Moody's also said a core strength of TGH is its fixed-rated debt, which is "reflective of the conservative nature of TGH and its financial leadership."

21. At the beginning of April, S&P raised the credit rating of Stanly Health Services in Albemarle, N.C., three notches — from "BBB+" to "A+" — due to the system's new partnership. Last year, Charlotte, N.C.-based Carolinas HealthCare System announced it would acquire full ownership of Stanly, agreeing to invest $70 million over the next 12 years, and that deal went into full effect this past March. S&P analysts said the operational, capital and strategic support from Carolinas will add to the system's current strengths, which include its strong market position as the only provider in its county.

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