CHICAGO - Operating gains prompted Moody's Investors Service to revise Iowa's UnityPoint health system's outlook to stable from negative Dec. 11.
The rating agency affirmed the system's Aa3 rating assigned to $935 million of outstanding debt. The review comes ahead of the system's planned sale this week of $200 million of taxable commercial paper notes that were assigned a P-1 rating. The system will provide self-liquidity for the notes.
The rating revision reflects "UnityPoint's improved same-store operating performance and balance sheet metrics in fiscal 2013 and into interim fiscal 2014, as well as our expectation that operating gains will continue," Moody's wrote.
UnityPoint management is starting to deliver improved results at recently affiliated organizations that previously had been struggling, including Meriter Health Services.
"Expected material improvement in fiscal 2014 in Meriter's PPIC health plan is a key factor in the outlook revision to stable," Moody's said.
The system's growth has also posed challenges as management continues to integrate multiple hospitals including the struggling Meriter and has added a health plan to the system's portfolio of operations. Health insurance requires a new management skill-set and is a sector that is challenged, particularly under the healthcare reform environment.
The Aa3 rating reflects UnityPoint's adequate liquidity ratios and diversified operations across multiple markets in Iowa, Illinois, and Wisconsin. UnityPoint is the largest healthcare system in Iowa. Its expansion through acquisitions in Wisconsin and Illinois have allowed it to diversify.
UnityPoint's liquidity ratios of 229 days cash on hand are considered adequate at the current rating level and have seen improvement in recent years. Moody's said it also considers UnityPoint's capital spending plans manageable in the coming years.
