St. Louis-based Ascension, a 136-hospital system, had its issuer default rating and long-term revenue bond ratings affirmed at "AA+" due to its strong operational profile, key leverage metrics and robust balance sheet, according to a Sept. 20 Fitch Ratings report.
The rating reflects Ascension's "national size and scale," with a significant presence in key markets, including Texas, Tennessee, Florida and Indiana, according to Fitch. These factors create unique credit features seen in only a handful of health systems in the sector.
"Ascension has made significant progress in resuming typical operations by divesting significant assets in markets such as Illinois, Michigan and most recently, Alabama," Fitch said. "Beyond these divestitures, durable cost savings initiatives have also contributed to operational gains."
The rating agency expects Ascension to generate a consistent operating margin of about 3% over the next several years, aligning with the health system's "north star."
Fitch's rating outlook for Ascension is negative, reflecting the $1.8 billion operating loss for the fiscal year ending June 30, despite a $1.2 billion operating improvement in core operations. The FY 2024 results include $402 million in one-time, non-cash write-downs and non-recurring losses.
A substantial amount of the loss was due to the May ransomware attack, resulting in reduced revenues from the associated business interruption along with costs incurred to address the issues and other business-related expenses.
Fitch considers the asset sale and cyberattack losses one-time in nature, resulting in a more normalized run-rate of negative losses on recurring operations in fiscal 2024.
"While temporarily impacted by the cybersecurity incident, Ascension's balance sheet and liquidity levels remain strong with sufficient liquidity to continue to provide care for patients," Ascension CFO Saurabh Tripathi said. "Ascension's solid financial foundation of a strong balance sheet with approximately $41 billion of assets and over $15 billion of liquidity was built to weather a storm like this. With the strong momentum of operational improvements, I am confident Ascension's best days are ahead of us."