In addition, Fitch affirms the 'A+' rating on the following bonds issued by the
*Bonds are insured by
**Bonds are supported by a direct-pay letter of credit provided by BMO (Issuer Default Rating of 'AA-/F1+' by Fitch).
The Rating Outlook is Stable.
Debt payments are secured by a pledge of the gross revenues of the obligated group and a first mortgage on HRMC. As of
KEY RATING DRIVERS
CONTINUED SOLID FINANCIAL PROFILE: HRMC's financial profile is solid with good operating profitability, excellent debt service coverage and healthy liquidity. The majority of HRMC's financial metrics well exceed the 'A' category medians. Profitability is somewhat compressed at
STRATEGIC INVESTMENT PROGRESS: HRMC is pursuing a variety of strategic initiatives focused on providing care in the right setting, quality and efficiency, managing populations and physician alignment, including the construction of seven new clinics in the
EXCELLENT DEBT SERVICE COVERAGE: HRMC's strong cash flow has led to excellent debt service coverage ratios. Debt service coverage by EBITDA was 5.6x for fiscal 2013 and 7.1x for the nine months ended
STRONG MARKET POSITION: As a designated sole community hospital, HRMC has a dominant 81.3% market share in its primary service area as of fiscal 2013. Its clinical expansion into the northern part of the Greater Metropolitan Kansas City service area is expected to further develop its regional footprint. In addition, HRMC remains a low cost provider, resulting in favorable commercial payment arrangements.
MAINTENANCE OF STRONG FINANCIAL PROFILE: Fitch expects HRMC to continue to maintain its strong operating cash flow, solid liquidity and debt service metrics. Profitability is expected to rebound as the system executes on its strategic initiatives and clinical expansion into the Greater Metropolitan Kansas City market.
The 'A+' rating is supported by strong financial metrics and strategic initiatives of HRMC, including the addition of seven clinics in the
GOOD OPERATING PROFITABILITY
HRMC's financial profile has remained very strong for the rating category for more than five years since fundamentally changing operations in its quest for the Malcolm Baldridge award, which the system won in 2009. Operating margin and operating EBITDA margin in fiscal 2013 were very strong at 5.2% and 11.7%, respectively, compared to the 'A' category medians of 2.5% and 9.5%. For the nine-month interim period ended
Strong profitability is also supported by its relationship with
MANAGEABLE DEBT BURDEN; ROBUST DEBT SERVICE COVERAGE
HRMC's debt burden is moderate with MADS at 2.6% of fiscal 2013 revenue. MADS coverage by EBITDA of 5.6x in fiscal 2013 and 7.1x at
HRMC has approximately
The rating is also supported by HRMC's designation as a sole community hospital, which has contributed to its position as the market leader in a stable service area. As of 2013, HRMC controlled 81.3% of the market share in the primary service area and had 19.6% in the secondary service area, for a combined market share of 45.3%. While HRMC's dominant market share position in
HRMC agrees to provide for annual and quarterly disclosure to bondholders and the
Additional information is available at 'www.fitchratings.com'.
--'Nonprofit Hospitals and Health Systems Rating Criteria' dated
--'Revenue-Supported Rating Criteria', dated
U.S. Nonprofit Hospitals and Health Systems Rating Criteria
Revenue-Supported Rating Criteria
Source: Fitch Ratings
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