Moody's Investors Service upgraded HealthPartners Inc., Minn. one notch to A2 in recognition of its improved operating performance.

The outlook at the higher rating was revised to stable from positive. The action impacts $268 million of debt issued through the Housing and Redevelopment Authority of Saint Paul and Minneapolis.

HealthPartners is operates six hospitals. The system includes its flagship Regions hospital, two rural Wisconsin hospitals, Lakeview Hospital in Stillwater, Minn., Park Nicollet Health Services which includes Methodist Hospital in St. Louis Park, Minn., a physicians group, and growing health plans with more than 850,000 medical members.

"The rating upgrade …reflects HealthPartners' continued favorable operating performance in fiscal year  2012, the improved operating results at PNHS….and maintenance of very strong balance sheet and debt coverage ratios," Moody's said. The agency noted operating margins seen in 2011 and 2012 are not expected to be maintained.

The credit benefits from the system's size, a track record of profitability with improved results in 2011 and 2012, a low debt load, and conservative balance sheet management with all fixed-rate debt and investments in cash and fixed securities.

Its challenges include member concentration in the Twin Cities market, significant competition from other facilities, high Medicaid exposure at HealthPartners facilities, challenges faces by its health plans due to healthcare reform, and risks associated with integrating PNHS into HealthPartners. They agreed to merge last year.

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