The Rating Outlook is Stable.
Gundersen has an additional
The bonds are secured by a gross revenue pledge of the obligated group.
KEY RATING DRIVERS
HISTORY AS INTEGRATED SYSTEM: Fitch believes a key credit component supporting the 'A+' rating is Gundersen's vertically integrated delivery model which includes an employed medical staff and a health plan. Over 20 years operating as an integrated delivery system has resulted in solid financial performance at levels consistent with the rating.
SOLID BALANCE SHEET: Gundersen maintains a strong level of liquidity against a moderate debt burden. As of
WANING CAPITAL NEEDS: Gundersen is on the tail-end of a significant expansion and renovation of its main inpatient facility. The capital plan for fiscal 2014-2016 totals
DYNAMIC AND COMPETITIVE LANDSCAPE: The primary competitor in the service area is
STEADY CASH FLOW: Gundersen will need to maintain solid cash flow to support its capital needs. Fitch anticipates Gundersen will reach its operating targets, maintaining a 3%-4% operating margin and mitigating any balance sheet impact from internally funded capital expenditures.
Gundersen is an integrated health care system based in
Fitch's analysis is based on the obligated group which does not include the corporate parent, the health plan, affiliate hospitals, long term care facilities, and other related entities. Fitch does not have access to consolidating or combined financial statements as part of its analysis.
INTEGRATED DELIVERY PLATFORM
Gundersen continues to be successful in leveraging its vertically integrated delivery system strategy, allowing it to maintain a solid inpatient market share of 30.4% inpatient market share of within its 19-county service area in 2013, up from 26.6% in 2011. Fitch believes that Gundersen's integrated delivery platform has positioned it well with regard to various healthcare reform components including improving quality, efficiency, standardization of clinical care, making it a an appealing population health partner for payors, and successful implementation of information technology.
DIMINISHING CAPITAL PLANS
Gundersen is at the tail end of a period of significant capital investment supporting its campus renewal plan. Opened in
STEADY CASH FLOW
Fitch expects Gundersen's integrated delivery model and targeted improvements in efficiency will maintain adequate operating profitability. Gundersen has generated an average of
Solid cash flow has produced consistent coverage of maximum annual debt service, equal to 5.6x by EBITDA as of the six month interim period ended
Since 2012 Gundersen has covenanted to provide both annual and quarterly disclosure for the obligated group, which is viewed positively as it is a change from prior covenants which only included annual reporting. Annual audited reports are disseminated no later than 150 days following audit year end, and quarterly reports are disseminated no later than 60 days after the end of each quarter. Reported content includes financial statements, utilization, and key metrics.
Additional information is available at 'www.fitchratings.com'.
--'Nonprofit Hospitals and Health Systems Rating Criteria' (
U.S. Nonprofit Hospitals and Health Systems Rating Criteria
Dmitry Feofilaktov, +1-212-908-0324
Source: Fitch Ratings
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