Standard & Poor's Ratings Services has revised the outlook on its 'A+' underlying rating on Connecticut Health & Educational Facilities Authority's series 2008 health system revenue bonds, issued for Greenwich Hospital, to stable from negative.
S&P contends that Greenwich Hospital has seen significant operating improvement with better-than-expected results for fiscal 2009 and is tracking ahead of budget for the first quarter of fiscal 2010. S&P also says, however, that days' cash on hand remains slightly weaker than historical levels, although year-to-date days' cash is adequate for the rating
S&P also affirmed its 'A+' underlying rating on the hospital's debt and affirmed its 'AAA/A-1' rating. The firm’s 'AAA' rating is jointly based on a direct-pay letter of credit provided by Bank of America (A/A-1) – which will expire in May 2013 – and Greenwich Hospital's (A+) rating.
"We believe Greenwich Hospital's operating profitability and moderate capital spending plans should allow the organization to maintain balance sheet ratios consistent with the rating," said Standard & Poor's credit analyst Jessica Goldman. "A drop in operating performance or a sharp deterioration in liquidity, however, would be a credit factor."
Greenwich Hospital has seen historically solid operating profitability and light debt burden, Goldman said, generating strong debt service coverage for the past three fiscal years, strong cash-to-debt ratio of 283 percent at fiscal year-end 2009 and liquidity that rebounded slightly for the year as measured by days' cash on hand of 181 days, although the latter declined slightly to 167 days' as of Dec. 31, 2009.
The hospital is the only hospital in Greenwich, but Goldman said market share in the total primary service area is modest based on competition from other area providers and due to out-migration to hospitals in nearby New York City.
One indicator of the hospital’s financial improvement was a strong operating gain in fiscal 2009, well ahead of management's guidance provided during the last review. Operating income was $7.9 million, or a 2.7 percent margin, for the system in 2009.
In addition, the hospital had above-budget volumes for the past four months of the year, which generated revenues above projections. Goldman said excess income declined to $4.7 million, or a 1.6 percent margin, in fiscal 2009. For the three months ended Dec. 31, 2009, the system posted an operating gain of $1.4 million, or a 1.9 percent margin, which is ahead of budget and the previous year.
For the interim period, Greenwich’s outpatient revenues are below budget, inpatient revenues are up, and salary expenses and bad debt expenses are under budget. For fiscal 2010, Goldman said, hospital management is budgeting a 1.9 percent operating margin for the hospital.