Fitch Ratings Affirms a 'A+' Long-Term Rating for Renown Health
August 29, 2022
Fitch Ratings has affirmed the 'A+' long-term rating on the series 2020A, 2020B, 2015A and 2016A bonds issued on behalf of Renown Health by Public Finance Authority for Renown’s $469 million Master Facilities Construction Project which includes hospital campus improvements and new health care facilities across northern Nevada to meet the growing community need over the next three years.
Given significant consumer demand for Renown providers and services, a master facilities planning process was undertaken to ensure that Renown has adequate bed and procedure capacity, spaces to accommodate new technology and services to meet the needs of a growing patient base and community.
Fitch listed the following reasons for the A+ rating:
- Renown remains the single largest provider of high-end acute care services and is maintaining a leading market position, with approximately two thirds of all patients in northern Nevada seeking care at Renown.
- Renown has strong balance sheet metrics, which have seen a decline in 2022 partly due to operations, but also due to an equities market contraction.
- Fitch believes that Renown has detailed operational improvement plans, with quick hit expensive savings items along with a medium-term focus to recruit and retain staff (and reduce agency/traveler expenses) and also longer-term goals to accept more risk to stabilize their revenue stream, such that Renown will return to operating EBITDA margins in approximately the 7% range.
Last week, Fitch Ratings adjusted its outlook for nonprofit hospitals from "neutral" to "deteriorating" halfway through what has proven to be a rough year for the industry. Likewise, Fitch's Rating Outlook for Renown Health has been Revised to Negative from Stable.
The macro headwinds of labor pressures and high inflation were known heading into 2022 but “have been more pronounced than expected,” the ratings agency wrote in a midyear outlook report released Tuesday.
“While severe volume disruption to operations appears to be waning, elevated expense pressure remains pronounced,” Kevin Holloran, senior director at Fitch Ratings, said in a release accompanying the outlook report. “Even if macro inflation cools, labor expenses may be reset at a permanently higher level for the rest of 2022 and likely well beyond.”
Fitch said it’s expecting “a more manageable endemic period” for hospitals balancing COVID inpatient and welcoming the return of surgical and specialty care volumes that “have returned to near pre-COVID-19 levels in many markets.” On the other hand, uncertainty abounds during a pandemic that has shown its ability to resurge time and again, the agency wrote.
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