Why 12 hospitals received credit rating upgrades

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At least 12 hospital and health system credit rating upgrades have occurred since Jan. 1.

1. AnMed Health (Anderson, S.C.) — from "A+" to "AA-" (Fitch Ratings)

"The upgrade to 'AA-' reflects AnMed's sustained solid operating performance and leading market position in a stable service area. Strong cost flexibility through the pandemic contributed to a fiscal 2020 operating EBITDA margin of 11.8 percent, comparable to recent years," Fitch said.

2. Ballad Health (Johnson City, Tenn.) — from "Baa1" to "A3" (Moody's Investors Service)

"The upgrade to 'A3' reflects Ballad Health's demonstrated ability to operate effectively under state-imposed regulations following the 2018 merger of two formerly competing and like-sized health systems," the credit rating agency said. "Moody's expects Ballad will continue to generate synergies through integration and consolidation while remaining compliant with the rate regulation terms of certification."

3. Erlanger Health System (Chattanooga, Tenn.)  — from "Baa3" to "Baa2" (Moody's Investors Service) 

"The upgrade to Baa2 reflects Moody's expectation that Erlanger Health  System will sustain the improved operating margins demonstrated  across the past two years, driven by management's execution of a robust performance improvement plan," the credit rating agency said. "The improvement in cash flow and lower capital spending in the past two years has led to solid growth in liquidity."

4. HonorHealth (Phoenix) — from "A" to "A+" (Fitch Ratings)

Fitch said the upgrade reflects "HonorHealth's continued improvement in liquidity and maintenance of solid profitability despite the recent challenges of the coronavirus pandemic."

5. King's Daughters Health (Madison, Ind.) — from "Baa3" to "Baa2" (Moody's Investors Service)

"The upgrade to 'Baa2' reflects expected sustainability of KDMC's multiyear improvement in margins due to turnaround strategies and a new partnership with the University of Kentucky that will bring material new revenue to KDMC," Moody's said. "Additionally, the upgrade further incorporates the recent closure of the competitor hospital, which will secure KDMC's dominant market position and sustain volume growth over the last year."

6. National Jewish Health (Denver) — from "BBB" to "BBB+" (Fitch Ratings)

"The upgrade to 'BBB+' reflects [National Jewish Health's] ongoing revenue support from its joint operating agreements, expected future revenue from a new center for outpatient health that will open in the fall of 2021, and Fitch's expectation that [it] will be able to sustain improved operating margins at levels which preserve and/or grow liquidity," Fitch said.

7. Owensboro (Ky.) Health — from "BB+" to "BBB-" (Fitch Ratings)

"Over the past couple of years [Owensboro Health] has been able to realize the previously expected improvement in leverage metrics achieving a financial profile assessment that now reflects sustainability at the 'BBB' assessment, and therefore driving the upgrade to 'BBB-,'" Fitch said.

8. Parkland Health & Hospital System (Dallas) — from "A+" to "AA-" (Fitch Ratings)

"The one-notch upgrade to 'AA-' notes Parkland's sustained improvement to operating profitability over the past several years, which has improved Parkland's unrestricted liquidity. Fitch views the combination of improved operating results and a more robust balance sheet as commensurate with a higher rating category," Fitch said.

9. Phoenix Children's Hospital — from "A+" to "AA-" (Fitch Ratings)

"The upgrade to 'AA-' reflects Fitch's expectation that [Phoenix Children's] will maintain very strong cash flow generation that supports an improving balance sheet in the midst of large capital spending plans for multiple construction projects throughout the Phoenix metropolitan area," Fitch said.

Fitch added that its capital projects are expected to provide significant revenue generation and market share growth opportunities.

10. Sauk Prairie Healthcare (Prairie du Sac, Wis.) — from "B1" to "Ba3" (Moody's Investors Service) 

"The upgrade to 'Ba3' expects Sauk Prairie Healthcare's sustained levels of stronger operating performance and maintenance of improved headroom to financial covenants, seen over the last three years, will continue over the near-term," Moody's said.

11. Sanford Health (Sioux Falls, S.D.) — from "A+" to "AA-" (Fitch Ratings)

"The 'AA-' IDR and revenue bond ratings reflect Sanford's leading inpatient market share in multiple markets and strong financial profile," Fitch said. 

The credit rating agency added that the upgrade came as Sanford maintained margin stability after its acquisition of a national provider of senior care services.

12. St. Tammany Health System (Covington, La.) — from "A+" to "AA-" (Fitch Ratings)

"The upgrade to 'AA-' reflects an improved financial profile, with consistently strong operating cash flows that have contributed to solid liquidity growth even in the midst of the coronavirus pandemic," the credit rating agency said. "Fitch views St. Tammany's more robust balance sheet, with cash-to-adjusted debt that has grown to above 180 percent."

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