• On 21 May 2013, Moody’s announced rating actions on MBIA Insurance Corp., National Public Finance Guarantee Corp., MBIA Inc. and other related entities. Because of the large number of credits across several asset classes affected by these rating actions, including Moody's-rated securities that are guaranteed or "wrapped" by these companies, ratings appearing on this website may not yet reflect current information. For current information on affected credits, please visit www.moodys.com/fig.
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Announcement:

MOODY'S AFFIRMS HOLY REDEEMER HEALTH SYSTEM'S (PA) Baa2 DEBT RATING; OUTLOOK IS NEGATIVE

Global Credit Research - 01 Dec 2011

HEALTH SYSTEM HAS APPROXIMATELY $86 MILLION OF RATED DEBT

New York, December 01, 2011 -- Moody's Investors Service has affirmed the Baa2 rating on Holy Redeemer Health System's (HRHS) outstanding Series 1997 and 2006 bonds. HRHS has approximately $86 million of outstanding rated debt, incorporating the recent redemption of $21.9 million of Series 1997 bonds using proceeds from a taxable bank loan as described in more detail below. The outlook is negative.

HRHS is a Catholic health care system comprised of a 263-bed acute care medical surgical hospital; long-term care facilities and communities in Pennsylvania with a total of 526 independent living and 122 personal care beds, 416 skilled nursing beds and 30 transitional housing units; four home health agencies along with three Medicare certified hospices; a freestanding ambulatory surgery center; and a physician corporation as well as other various affiliates.

RATINGS RATIONALE:

The Baa2 rating reflects HRHS' diversified healthcare services, unrestricted cash levels, and largely fixed rate debt structure. These credit strengths are offset by ongoing pressure on hospital patient volumes and net patient revenue growth and allocation to alternative investments limiting liquidity.

STRENGTHS

*Sizable provider with diversification of services including a hospital, sizeable home health and long-term care ($357.3 million of operating revenue in FY 2011)

*Healthy cushion of unrestricted cash and investments for the System relative to Baa2-medians (HRHS' days cash on hand was 142 days in FY 2010 and improved to 163 days in FY 2011, compared to Baa2 median of 110.5 days in FY 2010) although this credit strength is offset by the System's asset allocation and more limited liquidity measures

CHALLENGES

*Significant competition from hospitals in the crowded greater Philadelphia market as indicated by multi-year declines in patient volumes and essentially flat net patient revenue growth in FY 2011

*Ongoing pressure on operating cash flow (8.1% operating cash flow margin in FY 2011), with challenged operating performance during the first 3 months of FY 2012 ($588,000 operating deficit during the three months ending September 30, 2011)

*Limitations on liquidity as a result of investments in hedge funds and other alternative investment vehicles (by Moody's calculation unrestricted monthly liquidity covers 90 days of cash expenses in FY 2011)

*Challenging payor mix characterized by high Medicare due to HRHS' focus on senior services and a concentration of commercial business with two large payors (48.2% of gross patient revenues from Medicare in FY 2011 including Medicare managed care); skilled nursing facilities, in particular, face Medicare and Medicaid cuts

Outlook

The negative outlook reflects ongoing pressure on patient volumes contributing to thin operating performance and ongoing pressure on Medicare and Medicaid reimbursement, particularly for skilled nursing facilities. An inability to grow net patient revenue and contain expenses to improve operating cash flow could result in rating pressure.

WHAT COULD MAKE THE RATING GO UP

Material and sustained volume growth translating into an improvement in operating performance; a significant increase in liquidity and improved leverage measures

WHAT COULD MAKE THE RATING GO DOWN

Further decline in operating cash flow or monthly liquidity, substantial increase in debt, prolonged volume declines

The principal methodology used in this rating was Not-for-Profit Hospitals and Health Systems published in January 2008. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

Although the present credit ratings have been issued in a non-EU country which has not been recognised as endorsable at point of registration, the present credit ratings may still be used by financial institutions for regulatory purposes until 31 January 2012, including credit ratings issued within this period. Moreover, ESMA may decide and disclose by end December 2011 to extend the possibility to use credit ratings for regulatory purposes in the European Community for three additional months, until 30 April 2012, provided that exceptional circumstances occur that may imply potential market disruption or financial instability. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Kimberly S. Tuby
Vice President - Senior Analyst
Public Finance Group
Moody's FIS Domestic Sales Office - Boston MA
1 Post Office Square, 39th Floor
Boston, MA 02109-2103
U.S.A.

Lisa Martin
Senior Vice President
Public Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

MOODY'S AFFIRMS HOLY REDEEMER HEALTH SYSTEM'S (PA) Baa2 DEBT RATING; OUTLOOK IS NEGATIVE
No Related Data.

 

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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