Contact: Daniel Murphy
Release: July 26, 2010
Moon Township, PA, (July 26, 2010) – Recently, Standard & Poor's Ratings Services and Fitch Ratings, both of New York, performed their routine bi-annual reviews on the financial health of Heritage Valley Health System. Standard and Poor’s (S&P) re-affirmed its 'AA-' underlying rating and Fitch re-affirmed its 'A+' rating for Heritage Valley Health System.
In their report, Standard and Poor’s stated that the rating affirmation reflects Heritage Valley's solid business position in suburban Pittsburgh due to improved operating income for the first 10 months of fiscal 2010, expense controls and excess income from positive investment market conditions. The report noted that liquidity has also improved and remains strong despite the downturn in investment results during fiscal 2009. While maintaining a stable outlook, S&P sees the potential for a higher future rating should operating margin indicators continue to improve, further strengthening an already strong balance sheet position.
Fitch’s report reflects Heritage Valley’s approximately 64% inpatient market share in a 70-mile service area, which is supported by affiliated physician groups, two hospitals, ConvenientCare walk-in clinics, and outpatient sites located throughout the region. Heritage Valley’s liquidity metrics exceed Fitch's 2009 'A' category medians, with 256.8 days cash on hand, a cushion ratio of 42.4 times (x) and cash to debt of 375.2%, as of April 30, 2010. Fitch noted the five straight audited years of positive operating margins for Heritage Valley, reversing a history of negative operating margins from fiscal 2001 to 2004. The report noted that Heritage Valley continues to strengthen its market footprint, with outpatient centers spread throughout the region, a robust information technology system that includes a mobile clinical access portal and a single electronic medical record accessible from physician offices and satellite locations, and joint ventures that have fostered working relationships with potential competitors and broadened Heritage Valley’s service lines toward the full continuum of care.
Fitch’s outlook of the revision from a positive to a stable outlook reflects a more stable trend in Heritage Valley's operating profile combined with reimbursement pressures expected from healthcare reform, which Fitch believes will pose a larger burden on smaller, less geographically diverse healthcare systems. Fitch believes Heritage Valley has significant financial flexibility at the current rating, given their market share, liquidity and light debt burden. The report also acknowledged Heritage Valley’s successful execution of their joint venture strategy, which has added operating income to the health system, helped expand service lines, and provide cost savings, helping blunt the effect of reimbursement pressures.
Bryan Randall, chief financial officer of Heritage Valley Health System, stated “we are pleased with the positive reviews by both Standard and Poor’s and Fitch, especially in a difficult economic climate for the healthcare industry when downgrades are commonplace. We continue to apply the fundamentals of good financial management and stewardship at all levels of our health system. Our leadership and management team works diligently to execute on the strategy set by our board of directors to achieve both the annual capital and operating plan goals.”