An approximately $1.3 billion borrowing by Hartford HealthCare maintained the health system’s A-plus rating, even after a challenging year due to the pandemic, Fitch Ratings announced on Wednesday.
The revenue bonds, issued by the quasi-public Connecticut Health and Educational Facilities Authority on the system’s behalf, also maintained its A-plus issuer default rating from Fitch, and a rating outlook of “stable.”
The bonds are secured by a pledge of the gross revenues and assets of all of HHC’s hospitals.
Fitch praised HHC management for moving forward with strategic initiatives like a centralized call center despite the pandemic. The system’s operating margin was 5.7% in fiscal year 2020, down from 10.1% in FY2019 but still better than expected, Fitch said. About $242 million in federal CARES Act pandemic-relief funding helped boost HHC’s bottom line, the ratings agency noted.
HHC also continued to invest in its latest acquisition, St. Vincent’s Medical Center, although the Bridgeport hospital lost $12.7 million on operations in FY20 and is expected to remain a drag on the system’s performance.
“Fitch’s forward look shows HHC returning to historical levels of performance over the next two to three years, with FY21 as a transition year,” the company said in a statement.
Risks ahead for the health system include the current and possible future surges in COVID-19 infections, which could cause restrictions on non-emergency patient volumes.
“While Fitch expects not-for-profit acute care hospitals to continue to face uncertainty and considerable pressure in the coming months, with the expected rollout of coronavirus vaccines, the long-term outlook for the sector should improve,” the statement continued.
Fitch said its analysis was based upon HHC’s consolidated financial statements, which showed consolidated operating revenue of $4.3 billion in FY20.
