In addition, Fitch affirms the 'AA' long-term ratings on approximately
The Rating Outlook is Stable.
PH&S expects to issue a total of
Unsecured corporate obligation of the
KEY RATING DRIVERS
STRONG MARKET POSITION: Fitch views PH&S' geographic diversity and business line diversity as key credit strengths. The increasing breadth of healthcare services across
WEAK 2013 PROFITABILITY: Operating profitability continued to decline in fiscal 2013. Although Fitch expected PH&S' profitability to be compressed in 2011 and 2012, the poor operating results in 2013 were not anticipated and reflect, in part, continued challenges in reacting to changing clinical volumes throughout the system, lower than expected reimbursement from governmental payors and continued investment in IT. Profitability is expected to rebound in 2014 due to cost reduction initiatives and decreased IT implementation costs.
EXCELLENT BUSINESS PRACTICES: Despite the poor operating performance in 2013, Fitch believes management is proactively transitioning the organization to maintain its leadership positions as key markets move to population health management payment models. PH&S' excellent management practices are reflected in a robust IT platform and continued centralization of shared services that allows for detailed operational reporting.
MODEST DEBT BURDEN: Fitch estimates pro-forma maximum annual debt services (MADS) at
LIGHT LIQUIDITY METRICS: At
PROFITABILITY IMPROVEMENT: Fitch expects that operating profitability will improve in fiscal 2014, providing cash flows sufficient to increase MADS coverage by operating EBITDA to levels consistent with Fitch's 'AA' medians. Failure to do so could result in negative rating pressure.
PH&S is a large, multi-state health system that is composed of 34 acute care hospital facilities located across five states, an
PH&S posts annual audited financial statements and quarterly unaudited financial statements on its web site, 'www.providence.org', which is viewed positively by Fitch. Quarterly information includes balance sheet, income statement, cash flows, management discussion and analysis and utilization statistics.
For more information, see Fitch's rating action commentary:
Additional information is available at 'www.fitchratings.com'.
--'Revenue-Supported Rating Criteria' (
--'US Nonprofit Hospitals and Health Systems Rating Criteria' (
--'Rating US Public Finance Short Term Debt' (
Revenue-Supported Rating Criteria
U.S. Nonprofit Hospitals and Health Systems Rating Criteria
Rating U.S. Public Finance Short-Term Debt
Source: Fitch Ratings
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