Fitch Ratings on Friday revised the rating outlook to stable from negative on $260 million of bonds issued for the Mount Sinai Medical Center of Florida.
Fitch also affirmed its BB-plus rating on debt issued on behalf of MSMC by the Miami Beach Health Facilities Authority. The action affects Series 1998, 2001A, and 2004 hospital revenue bonds.
“The affirmation is based on MSMC’s improved operating results, relatively stable liquidity, and strong philanthropic support,” said a report by Fitch analyst Jonathan Mandel. “The stable outlook is based on improvements to utilization figures, especially to the high-end service lines which have improved profitability.”
“Continued improvements to the operating margin due to expense reductions and growth in key service lines, combined with the stable liquidity position, should maintain MSMC at the current rating level for the near- to medium-term,” Mandel said.
The center had an operating loss of $15.7 million in 2008 and a prior-year loss of $8.9 million.
Mandel said management has taken several steps to improve operating results, including adding doctors in key service lines and maintaining overall expense increases at only 0.3% year over year.
The initiatives resulted in an increase in attention paid to patients, driven by strong cardiac surgical volume up 31% year over year, thoracic surgery volume up 15%, an increase in the case mix index, and an increase in emergency room visits.
As a result, through the six-month interim period ending June 30, operating income was negative $5.4 million. Mandel said the figures do not include a $10 million transfer from the foundation for the fiscal year, which is recorded as net revenue.
“The Mount Sinai Medical Center Foundation continues to see strong community support as pledge revenues are up over 100% year over year,” he said. “Primary credit concerns include the high debt burden and the disposition of Miami Heart Institute.”
MSMC’s debt burden remains high, with maximum annual debt service as a percentage of revenue at 4.7%. “The debt is all fixed rate and there are no swaps outstanding, which Fitch views favorably,” Mandel said, noting that strong historical debt service coverage has averaged 1.9 times over the last five fiscal years.
Since late 2007 MSMC has tried to sell the Miami Heart Institute, which carries $108 million of debt and sizable yearly carrying costs, according to Fitch.
MSMC is a teaching hospital consisting of 955 licensed beds and is the only health care provider in Miami Beach that offers a wide range of tertiary services.
According to its Web site, MSMC is the largest employer in Miami Beach, with over 3,000 workers, and the largest private nonprofit teaching hospital in South Florida with more than 700 doctors.