New Hyde Park, N.Y.-based Northwell Health had its issuer default rating and revenue bond ratings affirmed at "A-" due to its "leading market share position" in a large and competitive area where it has an expansive presence with acute care and ambulatory footprints, Fitch Ratings said in a Sept.23 report.
Six things to know:
1. The rating also reflects Northwell's ability to successfully manage growth. The health system has historically delivered "modest but stable operating results," even while faced with volatility in the hospital market over the last three years, such as high inflation and sharp increases for the costs of drugs, labor, supplies and equipment, according to Fitch.
2. Fitch's rating outlook for Northwell is stable, based on its expectation that the health system will be able to generate operating results in the near term similar to the fiscal year ending Dec. 31, 2023, which ended with an operating EBITDA margin of 6.1%.
3. Maintenance of these operating results is essential for Northwell to remain at the current rating level given the need to generate solid cash flows to support the health system's sizable capital plans, Fitch said.
4. Northwell's capital plans include an Epic EHR install, which will cost $1.2 billion to implement, the development of a large ambulatory facility in Manhattan and other projects needed to stay competitive. Northwell is also committed to grow its cash reserves to gradually return the health system to cash equal to debt.
5. Northwell also expects to finalize its merger with Danbury, Conn.-based Nuvance Health in the fourth quarter. The transaction would expand the combined organization's reach to 28 hospitals across New York and Connecticut.
6. As with all mergers, there is risk related to integration, especially given the challenges prevalent in the sector, which have led to a more difficult operating environment, according to Fitch. However, the ratings agency said Northwell has a highly skilled and cohesive management team that has a proven track record of success, which will allow for an efficient integration process.