Ratings Agencies Rule on Northwell's Debt

Crain's Health Pulse
September 15, 2016
Ratings Agencies Rule on Northwell's Debt

S&P Global Ratings on Wednesday assigned an "A-" long-term rating to Northwell Health's $500 million debt offering in revenue bonds with an outlook of "stable," citing the system's "dominant market position." The ratings agency noted the $8.7 billion health system has produced operating profits and has adequate cash flow. The ratings announcement struck a cautiously optimistic note about Northwell's future performance. "While margins have compressed over the past several years, management continues with its planned and targeted revenue enhancement and cost-saving initiatives that, when combined with strategic operating investments, should allow for incremental revenue growth and modest operating income over the outlook period," S&P wrote. The announcement followed a similar action from Moody's, which on Monday graded Northwell's debt "A3," a comparable rating on Moody's scale, which indicates an investment that carries little risk of default for investors. Moody's also noted the system's "large size and significant footprint" and "stable, albeit modest margins." However, the ratings agency also cautioned that performance metrics used to evaluate the system's balance sheet lag behind those of its peers and said CareConnect's large losses related to the federal risk-adjustment program posed a credit risk. The state Department of Financial Services recently took actionthat could reduce some of those risk-adjustment losses in the small-group market in 2017. —J.L.

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Dow Jones Newswire
September 15, 2016

 

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