A planned new medical center for New Jersey’s Inspira Health, on track for completion late this year, drove a two-notch upgrade Thursday.
Fitch Ratings raised Inspira Health’s bonds to AA-minus from A with a stable outlook, citing strong financial performance as Inspira nears completion of a new $356 million hospital in Mullica Hill, N.J. The facility, slated to open in November, will replace the current 311-bed Inspira Medical Center nine miles away in Woodbury, N.J., and include a comprehensive cancer center along with an expanded emergency room.
“The rating incorporates Fitch's expectation that operating performance will continue to be strong through the remaining construction period and the transition to the Mullica Hill replacement hospital,” Fitch analyst Madeline Tretout wrote. “Fitch believes Inspira is well positioned for a smooth transition into the new facility, continued revenue growth and continued strong operating performance.”
The upgrade applies to roughly $429 million of bonds issued in 2016 and 2017 by the New Jersey Health Care Facilities Financing Authority on behalf of Inspira. The AA-minus rating is two notches above Moody’s, which last rated Inspira’s debt at A2 with a stable outlook in May 2017 prior to a $265 million bond sale used primarily for construction of the new hospital. Around 88% of Inspira’s debt is fixed rate with about $59 million of the outstanding bonds privately placed, according to Fitch.
Tretout said Inspira has a leading and stable market share of close to 56% in its combined service area in southern New Jersey. IMC Mullica Hill will benefit from better highway access than the current location and receive a boost from a location next to to Rowan University's western campus, according to Tretout.
Inspira also operates 276-bed IMC Vineland, which Tretout said benefits from being the only hospital located in Cumberland County. The health system also includes IMC Elmer, a 59-bed psychiatric facility and an outpatient center.
Fitch is projecting that Inspira’s payer mix will see “small improvements” when the health system transitions to the new Mullica Hill campus. Medicaid and self-pay accounted for about 27% of gross revenues during the 2018 fiscal year when Inspira recorded about $806 million in total revenues, according to Tretout.
“Inspira's financial profile shows stability through the stress case scenario and emerges from the stress cycle with financial profile metrics consistent with the 'AA' category,” said Tretout. “The rating also reflects Inspira's leading market position in a stable service area and the large medical staff and outpatient network.”
