CHICAGO – Children’s Hospital Medical Center of Akron moved into the double-A category with an upgrade from Fitch Ratings.
Fitch raised the rating on about $200 million of debt from issues in 2012 and 2013 to AA-minus from A-plus and assigned a stable outlook citing strong revenue growth.
The upgrade “reflects CHMCA's continued liquidity growth, strong historical operating performance and above median debt service coverage,” analysts wrote in the report published late last week.
The system collected $808 million in revenues last year bolstered by an expansion of services. Revenues have grown 29% over the past four years.
The upgrade comes as the hospital is set to begin construction on a new $84 million professional services building that will be funded with working capital over the next two years.
Unrestricted cash and investments grew to $601.7 million in 2016 and equaled 311.2 days cash on hand. Liquidity if expected to remain stable as it funds the project and then cash growth is expected in 2019.
“Fitch believes CHMCA has enough capacity at the higher rating level to absorb the financial impacts of the construction,” analysts wrote.
CHMCA's market share is strong, but the service area remains competitive for pediatric services. The hospital has a high concentration of Medicaid patients which accounted for 51% of 2016 revenue so Medicaid stability is a “key credit concern,” Fitch said.
CHMCA operates two campuses with a 303-bed hospital on its main campus in Akron and a 43-bed facility in Boardman, Ohio, while also providing inpatient pediatric service at multiple community hospitals in the region.
Debt payments are secured by a pledge from the obligated group of the gross revenues and a mortgage pledge on certain property.