NIFA's expanded oversight of hospital a credit positive for Nassau County, Moody's says
A fiscal control board’s increased oversight powers of the struggling Nassau University Medical Center is a credit positive for Nassau County, according to Moody’s Investors Service.
In early February, the Nassau Interim Finance Authority's board of directors approved a financial takeover of NUHealth, which operates the East Meadow, N.Y.-based NUMC. NUHealth, also known as Nassau Health Care Corporation, has suffered persistent operating deficits stemming partly from a dependence on Medicaid reimbursements and a lack of senior leadership, as the hospital’s CEO and chairman of the board resigned in recent months. Nassau County backs $188 million in NUMC debt.
Moody's rates Nassau County general obligation bonds A2 with a stable outlook. Fitch Ratings and S&P Global Ratings rate the debt A and A-plus, respectively. The Long Island county, which is New York State’s sixth largest, has around $2.4 billion of outstanding GO debt, according to Fitch.
"The county guarantees the hospital's debt service and has been reimbursed for those costs," Moody's analyst Robert Weber wrote in a Feb. 12 report. "Given its limited financial reserves and narrow operating margin, the county does not have the financial flexibility to assist the hospital in a long-drawn-out recovery."
Weber noted NIFA stepped in now because further losses at the hospital could put about $20 million a year of debt service reimbursements at risk. Nassau has been under NIFA oversight since 2000 when the county was in danger of insolvency. NIFA seized control of Nassau finances in January 2011 when it failed to balance its budget under former County Executive Ed Managano.
Weber said Nassau County will benefit from added financial disclosures and NIFA's contract scrutiny. NIFA previously exempted NUHealth from its strict contract review process rules when it assumed control of the county's finances nine years ago.
“If operations were to decline significantly, it is likely the county would feel morally obligated to assist the hospital given its largely low-income patient makeup,” Weber said. “Given its limited financial reserves and narrow operating margin, the county does not have the financial flexibility to assist the hospital in a long-drawn-out recovery.”
NUHealth is now working with Northwell Health, New York State's largest healthcare provider, on a long-term plan to stabilize the public hospital’s operations. Weber noted the NIFA control will likely avert the negative social impact from further deterioration of NUMC.
In November, Fitch affirmed its A rating on NUHealth’s roughly $172 million in outstanding county-guaranteed bonds. Moody’s affirmed NUHealth’s Aa1 letter of credit-backed rating on the bonds in September. Moody’s underlying rating on the bonds is A2.