The Rating Outlook is Stable.
The bonds are secured by a pledge of gross revenues and debt service reserve fund.
KEY RATING DRIVERS
STRONG FINANCIAL PROFILE: Summit's financial profile is highlighted by its strong balance sheet metrics, consistently solid profitability, and satisfactory maximum annual debt service (MADS) coverage indicators for the 'A' rating category. Financial metrics as of
DOMINANT MARKET POSITION: Fitch views Summit's dominant market position in its primary service area (PSA) as a primary credit strength, as it helps to support the organization's underlying financial condition. In calendar year 2012,
SUCCESSFUL PHYSICIAN ENGAGEMENT: Summit's approach to engaging physicians, which includes employment, joint-venturing, and use of independent contracts, has been successful in sustaining the organization's market presence and profitability.
SOFTENING INPATIENT ADMISSIONS: Similar to other providers nationwide, Summit observed softened inpatient admissions in fiscal 2013 and year-to-date fiscal 2014. However, Fitch notes positively that the financial impact has been minimal to-date and senior leadership continues to actively explore ways to bolster top-line revenue growth, while effectively controlling expense growth.
HIGH EXPOSURE TO GOVERNMENTAL PAYORS: Summit's mix of governmental payors (
MANAGEABLE CAPITAL PLANS: Management entered into a
MAINTAIN STRONG FINANCIAL PROFILE: The Stable Outlook is based on Fitch's expectation that Summit will continue to effectively maintain its strong financial position consistent with historical trends.
Located in south-central
AFFIRMATION OF 'A+' RATING
The 'A+' rating is supported by Summit's strong financial profile, dominant market position with limited competition, good physician engagement strategy, and manageable capital plans.
In fiscal 2013 (
Solid operations and favorable investment returns have helped support good cash growth and satisfactory debt service coverage. Through
In fiscal 2015, management is budgeting for
Summit's overall debt burden, measured by MADS as a percentage of revenue of 3.1% in fiscal 2013 was identical to Fitch's 'A' category median of 3.1%. Further, MADS coverage is viewed as satisfactory and as a buoying credit factor for Summit at the 'A+' rating level. Over the medium-to-long term, Fitch expects the organization to moderate its debt burden given the lack of large capital investment plans.
The system operates two hospitals that serve patients in
Like other healthcare providers nationwide, Summit has observed softened inpatient admissions in fiscal 2013 and year-to-date fiscal 2014. Specifically, inpatient admissions decreased to 14,844 in fiscal 2013 (from 15,466 in fiscal 2012) and year-to-date inpatient admissions (as of
Management reported that inpatient utilization is being affected by various factors, including the reclassification of inpatients as observations patients (observation cases increased by 16% in fiscal 2013 over the preceding year) and changing consumer behavior as a result of lingering economic pressures and high deductible health plans.
Fitch remains concerned about Summit's increasing mix of governmental payors (
Management refinanced its fixed-rate series 2009 bonds on
Summit has an outstanding swap with Royal Bank of Canada (RBC; rated 'AA/F1+'; Stable Outlook) that required a collateral posting of
Summit covenants to submit annual and quarterly financial and utilization information to the MSRB's EMMA system. Management was candid and timely in its responses to Fitch during the credit review process.
Additional information is available at 'www.fitchratings.com'.
--'Nonprofit Hospitals and Health Systems Rating Criteria',
U.S. Nonprofit Hospitals and Health Systems Rating Criteria
Source: Fitch Ratings
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