Standard & Poor’s last week said Illinois’ decision not to renew some of its managed-care contracts with Carle Foundation subsidiary Health Alliance Medical Plans won’t affect the Urbana-based system’s A-plus rating, although the loss of business could pose a credit risk down the road.
The rating agency last month lowered the foundation to A-plus from AA-minus and assigned a stable outlook, in part due to the state’s delay in making managed-care payments to the Carle subsidiary.
Standard & Poor’s described the situation as one that could become a “disruptive operational issue if not resolved in the near future.”
Carle is protesting the state’s decision, which could significantly lower its revenues if not overturned. The state last month announced new managed-care contracts and said it was dropping Health Alliance from the menu of plans offered to employees.
The state estimates it will save $1 billion over 10 years.
The rating review last month came ahead of the foundation’s sale of $230 million of debt through the Illinois Finance Authority to refinance notes related to mortgages on two of its facilities, construct two new physician clinics, and construct and equip a new nine-story heart and vascular institute.
Fitch Ratings affirmed Carle’s AA-minus and assigned a stable outlook. The new issue will bring the foundation’s debt load to $702 million with 55% in fixed-rate mode and 45% in floating-rate mode.
Carle operates a 325-bed hospital in Urbana and several other health care facilities throughout the central Illinois region. Last year, the foundation acquired the Carle Clinic Association, which includes Health Alliance Medical Plans and various group medical practices.
