Fitch Ratings has upgraded King of Prussia, Pa.-based Universal Health Services' ratings and revised the hospital operator's outlook from positive to stable.
The rating upgrades, which apply to roughly $3.2 billion of debt outstanding as of March 31, involve the following:
- Issuer Default Rating — to "BB+" from "BB"
- Senior secured bank facility rating — to "BBB-" from "BB+"
- Senior secured notes rating — to "BBB-" from "BB+"
- Senior unsecured notes rating — to "BB" from "BB-"
Fitch issued the upgrades in response to various factors, such as UHS' continued commitment to debt repayment and strengthening cash flows stemming from a stabilizing acute-care business, a drop in uncompensated care and behavioral health operations growth, according to the ratings agency. Additionally, UHS' same-hospital admissions were flat in 2013, an improvement over the 2 percent and 2.2 percent declines in 2012 and 2011, respectively.
Fitch also regards the Patient Protection and Affordable Care Act as a net positive for UHS and other hospital operators because of expected net revenue growth from decreases in uncompensated care this year and next year. However, Fitch also believes it's likely that profit gains will drop in later years because of "an overall constrained healthcare reimbursement environment," according to the release.
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