Fitch Ratings marked Greensboro, N.C.-based Cone Health's bond rating at "AA-", down from "AA", after joining Risant Health with its rating outlook stable.
Six things to know:
1. The downgrade comes one month after Risant, a nonprofit formed by Oakland, Calif.-based Kaiser Permanente, acquired Cone Health, a five-hospital system.
2. Cone Health's "AA-" rating is equal to Kaiser's issuer default rating and revenue bond ratings.
3. Fitch withdrew Cone Health's IDR because the organization is now part of Kaiser and a separate IDR for Cone is no longer relevant to Fitch's coverage.
4. Kaiser's "AA-" rating is driven by its very strong financial profile, strengthened by a large and diversified revenue base and Fitch's expectation that the system will "maintain profitable operating margins and sound operating EBITDA margins," the ratings agency said in a Jan. 6 report.
5. The "AA-" rating is supplemented by Kaiser's market lead in California and broad reach among multiple states, now including Pennsylvania and North Carolina with Danville, Pa.-based Geisinger and Cone Health both joining Risant last year.
6. Fitch expects Kaiser to maintain profitability through its strong track record, cost flexibility and integration in the coming years. Operating profitability has been sustained in interim fiscal year 2024, with an operating margin of 1.4% through the nine months ending Sept. 30, which includes six months of Geisinger operations but does not include Cone Health.