Baton Rouge, La.-based Franciscan Missionaries of Our Lady Health System was upgraded to “A” from “A” by S&P Global Ratings, reflecting stronger operating performance, a solid balance sheet and improved debt service coverage. The outlook is stable.
Eight things to know:
1. S&P cited a three-year operating turnaround. FMOL Health has posted positive operating performance for the past three years, driven by revenue growth, expense control and higher supplemental funding. S&P said that trend has supported above-average debt service coverage.
2. Operating margin reached 5.2% in fiscal 2026. FMOL Health reported $255.4 million in operating income on $4.9 billion in operating revenue for the 12 months ended June 30, up from $159 million in operating income in fiscal 2024 and a $79.9 million operating loss in fiscal 2023. Operating margin improved to 5.19% in fiscal 2026 from -2.33% in fiscal 2023.
3. Revenue growth is being supported by volume, payer contracts and state-directed payments. S&P said the system has benefited from expanded medical staff and service lines, rising volumes, renegotiated payer contracts and increased supplemental funding through state-directed payment programs for hospitals and physicians.
4. Volumes continue to rise. Inpatient admissions increased to 109,290 in fiscal 2026 from 88,781 in fiscal 2023. Inpatient surgeries rose to 30,617 from 25,696 over the same period, while emergency visits climbed to 445,283 from 418,811. S&P said service line expansion and improved throughput have helped support market share gains.
5. Liquidity has strengthened. Unrestricted reserves reached $3.6 billion in fiscal 2026, up from about $2.1 billion in fiscal 2023. Days cash on hand increased to 290.2 days from 224.3 days over the same period. S&P said the stronger reserve position gives the system flexibility to support higher capital spending or potential future debt.
6. Debt remains a key credit strength. Long-term debt declined to about $913.5 million in fiscal 2026 from $954.5 million in fiscal 2023, while debt-to-capitalization fell to 18% from 27.1%. S&P described the system’s debt burden as low and declining, with no new borrowings planned for fiscal 2027.
7. Margins are expected to soften in fiscal 2027. FMOL Health is budgeting an operating margin of 3.6% for fiscal 2027 as industry pressures increase. S&P said the decline is partly tied to the loss of 340B revenue in the Jackson, Miss., market, though it expects profitability and debt service coverage to remain supportive of the “A+” rating.
8. Capital spending is set to increase. FMOL Health is planning several major projects, including an emergency department upgrade and dedicated cancer institute in Baton Rouge and a third medical office building at its St. Elizabeth campus in Gonzales, La. The three projects are expected to cost a combined $178 million and open in 2028. S&P said higher capital spending could draw down reserves or lead to additional debt, though no borrowings are expected in fiscal 2027.
