Standard & Poor’s on Monday revised its outlook on Ascension Health’s AA rating to positive from stable based on its strong balance sheet.
The rating agency attributed its action to the system’s strengths as the largest not-for-profit health care system in the country, very strong cash flow, established operating performance, and sizeable unrestricted reserves. Ascension has a total of $4.3 billion of outstanding debt under senior and subordinated liens. The subordinated debt is rated AA-minus.
“A higher rating is possible if the strength demonstrated in fiscal 2007 is sustained at or above current levels and balance-sheet measures are appropriately balanced with planned capital spending,” analyst Kevin Holloran wrote. “Ascension Health’s many credit strengths provide considerable flexibility even as rising overall costs, tightening revenues, and erratic market performance begin to pressure the entire health care sector.”
The action follows Moody’s Investors Service’s upgrade last month to Aa1 from Aa2 on Ascension’s senior debt and to Aa2 from Aa3 on the junior bonds. The positive credit actions come as Ascension has successfully improved its balance sheet even as it navigated challenging mergers, occasional struggles in individual markets, and what has grown to an annual $1.2 billion capital program.
The system, which operates 73 hospitals in 20 states and the District of Columbia, has a total of $4.3 billion of outstanding debt on its books.
Fitch Ratings assigns AA-plus and AA ratings to Ascension’s debt.
The system has steadily seen its cash levels grow, generating more than $1.5 billion in total cash flow annually. Its strong liquidity position, boosted by $6 billion in unrestricted investments that provide strong debt coverage, provide the flexibility needed to manage its large capital program.
The program rose to about $1.2 billion in annual spending last year from a traditional level of about $600 million, analysts wrote. Ascension has no immediate plans to issue new debt.
