TMCnet News
Fitch Affirms Greenwich Hospital's (CT) Rev Bonds at 'AA-'; Outlook StableFitch Ratings affirms the 'AA-' rating on the following hospital revenue bonds issued by the Connecticut Health and Educational Facilities Authority on behalf of Greenwich Hospital (the hospital or Greenwich): --$35.1 million series 2008C. The Rating Outlook is Stable. SECURITY The bonds are secured by a pledge of the gross receipts of the obligated group. KEY RATING DRIVERS EXCELLENT DEBT COVERAGE: The hospital has a very modest debt burden with maximum annual debt service (MADS) equating to very low 1.1% of revenue in fiscal 2015 (year-end Sept. 30). Philanthropy has funded significant portions of the hospital's capital needs, reducing the need to issue debt. MADS coverage by EBITDA remains excellent at 14.5x through the eight-month interim period ended May 31, 2016. ROBUST LIQUIDITY: At March 31, 2016, unrestricted cash and investments, not including more than $63 million of restricted endowment funds, translated to a robust 570% of long-term debt offsetting the risk associated with the hospital's 100% variable rate debt profile. CONSISTENT PROFITABILITY: Greenwich Hospital has a consistent record of operating profitability despite the negative impact of the Connecticut hospital provider tax and relatively flat inpatient volumes. The hospital is able to maintain strong margins by effectively managing costs and taking advantage of its affiliation with the Yale-New Haven Health System (YNHHS), allowing for consolidation of various services. Through the eight-month interim period ending May 31, 2016, the hospital achieved strong operating and operating EBITDA margins of 8.1% and 15%, significantly exceeding Fitch's 'AA' category medians. INCREASINGLY COMPETITIVE LANDSCAPE: Westchester County has seen a considerable amount of activity involving hospital affiliations and strategic relationships with New York based hospital systems. Additionally, Stamford Hospital is about to open a new patient tower with a portion of the space to be leased to Hospital for Special Surgery. To date, the more consolidated and competitive environment has not had a measurable negative impact on Greenwich Hospital's market share, but Greenwich is proactively responding by closer integration with its physicians and strategic placement of outpatient facilities. MEMBER of YALE-NEW HAVEN HEALTH: The hospital continues to benefit from an affiliation with Yale-New Haven Health System (YNHHS), which provides Greenwich Hospital with supply chain savings, managed care contracting, certain management services and clinical support in several subspecialties. RATING SENSITIVITIES MAINTENANCE OF CREDIT PROFILE: Fitch expects that Greenwich Hospital's operating performance will be stable through the medium term due to the strength of the hospital's market position, its low debt load, and the benefits from the Yale-New Haven Health affiliation. CREDIT PROFILE Greenwich Hospital consists of an acute-care hospital (206 beds) operating in Greenwich, CT. The hospital provides medical, surgical, dental and other health care services in its primary service area of Fairfield County, CT and portions of Westchester County, NY. Fitch's analysis is based on the consolidated entity, Greenwich Health Care Services, Inc. and subsidiaries, which had total revenue of approximately $359.7 million in fiscal year 2015. Greenwich Hospital is a member of YNHHS, comprising Yale-New Haven, Bridgeport Hospital, and Greenwich Hospital, but is not part of the YNHHS obligated group. MEMBER OF YALE NEW HAVEN HEALTH SYSTEM The relationship with YNHHS has continued to be a positive driver. The cancer program at Greenwich Hospital has been successful through leveraging the system's brand name and using the protocols of the Smilow Cancer Center at Yale-New Haven Hospital. Several oncologists were recruited for the Northeast Medical Group (NEMG), which allows Greenwich to remain competitive with Memorial Sloan-Kettering (rated 'AA'), which opened a new outpatient treatment center in Harrison, NY in 2014. NEMG is a 470-physician multi-specialty medical group affiliated with all three YNHHS hospitals. LOW DEBT BURDEN Due to its very modest debt burden, Greenwich Hospital continues tohave robust MADS coverage by EBITDA, most recently 12.9x in fiscal 2015 and also better than Fitch 'AA' category medians are Greenwich's MADS at only 1.1% of revenues and cushion ratio of 42.8x. All leverage metrics compare favorably to Fitch's respective 'AA' category medians of 5.7x, 2.4% and 27x, respectively. Through the eight month interim period, MADS coverage by EBITDA was reported at 14.5x and MADS as percent of revenues further declined to 1%. CONSISTENT PROFITABILITY Greenwich Hospital has been a significant net loser in the Connecticut provider hospital tax established in 2012. For the current fiscal year Greenwich was assessed $19.5 million, but is expected to receive only approximately $1 million in Medicaid Disproportioned Share Payments. Additionally, inpatient volumes have been relatively flat, with the exception of obstetrics; births increased by close to 45% since 2013. Management's response has been to set expense improvement targets to offset the impact of the provider tax deficit during the years that it has been in effect, for all hospital operations including clinical, labor and non-labor areas. In fiscal 2015, the $19.3 million target had been exceeded with expense savings of $20.2 million. As a consequence, Greenwich's profitability has been consistently strong and improving. The hospital produced operating income of $26.7 million in fiscal 2015, up from $15.7 million in fiscal 2013 and $25.1 million in fiscal 2014. The 2015 results translate to operating margin of 7.1% and operating EBITDA margin of 13.9%, both better than Fitch's medians of 4.9% and 11.5%, respectively. Profitability has been maintained through the interim period with operating income of $20.4 million, exceeding budgeted $16.1 million, and equal to operating EBITDA margins of 8.1% and 15%. Budget for next year is for a somewhat lower 2% operating margin due to several factors including an increase in the Connecticut provider tax, startup expenses of the new outpatient facility in Stamford and a temporary loss of revenues from terminating a joint venture (JV) partnership with a physician group. A new JV partnership has already been identified, but the revenues had not been incorporated into the 2017 budget. EVOLVING COMPETITIVE LANDSCAPE Greenwich Hospital has managed to maintain a steady market share of 36% of its primary service area, despite declining inpatient utilization across the service area and an increasingly competitive environment with a number of the metropolitan New York based systems acquiring and affiliating with stand-alone facilities in Westchester County. Stamford Hospital, with which Greenwich's service area somewhat overlaps, is opening a new patient tower later this summer and has entered into a relationship with the New York City based Hospital for Special Surgery (HSS). The entry of the orthopedic program, which will be operated by HSS at Stamford Hospital, could potentially have some impact on Greenwich's orthopedic volume. Greenwich is planning to mitigate this by opening a musculoskeletal center through the Yale School of Medicine along with multiple ancillary services in Stamford. As the competition in Greenwich Hospital's service area continues to evolve, the hospital will continue to leverage its relationship with the Yale New Haven affiliated Yale Medical Group and Northeast Medical Group, which have specialist and subspecialists practicing in Greenwich's service area. DISCLOSURE Greenwich Hospital covenants to disclose annual audits within 150 days of fiscal year-end to MSRB's EMMA system. Additional information is available at 'www.fitchratings.com'. Applicable Criteria Revenue-Supported Rating Criteria (pub. 16 Jun 2014) https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750012 U.S. Nonprofit Hospitals and Health Systems Rating Criteria (pub. 09 Jun 2015) https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=866807 Additional Disclosures Dodd-Frank Rating Information Disclosure Form https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1008835 Solicitation Status https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1008835 Endorsement Policy https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON (News - Alert) THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. View source version on businesswire.com: http://www.businesswire.com/news/home/20160713006443/en/ |
