NEW YORK — With excellent liquidity, a light debt burden and improved operations over the last several years, bonds from Cape May County’s only hospital were deemed a better investment by an international credit rating organization.
Fitch Ratings, with headquarters in New York and London, has upgraded $23.5 million of Cape Regional Medical Center’s outstanding healthcare revenue bonds, series 1999, from “A-” to “A” giving it a stable rating outlook.
This credit rating upgrade could make the bonds more appealing to investors and enhance the hospital’s ability to finance bonds. Cape Regional’s “A” rating suggests that its economic situation can affect its finances.
One of the “big three” rating agencies with Moody’s and Standard & Poor’s, Fitch’s long-term rating system is set on a scale from “AAA,” the best quality companies, to “D,” companies that have defaulted on obligations.
Cape Regional has a Moody’s rating of “A2” which is equivalent to Fitch’s “A” rating.
Sean Hopkins, senior vice president of health economics at the New Jersey Hospital Association (NJHA), told the Herald that bond ratings were important because it’s how hospitals pay for capital improvements.
“It’s like when you go to buy a car,” Hopkins said. “The better your credit rating, the lower the interest rate on your loan will be. For hospitals, the better their bond rating, the cheaper money is to acquire.”
Opened in 1950, Cape Regional (formerly Burdette Tomlin Memorial Hospital) is a 242-licenced (208 operated) bed facility with total revenue of $107.5 million in fiscal year 2007.
In its report, Fitch stated that since 2005 Cape Regional has improved operations with positive operating margins and positive excess margins.
The rating service also noted that the hospital’s stable outlook was based partly on its continued market dominance. According to Fitch, Cape Regional enjoys a 72 percent market share with its nearest competitor, Shore Memorial Hospital, over 20 miles away.
“This market dominance helps to offset concerns about Cape Regional’s small revenue size for the rating category,” the Fitch announcement stated.
Fitch cites four other factors that have helped the hospital sustain operating margins:
• Lowering length of stays from 4.9 days in 2004 to 4.3 days in 2007
• Starting a hospitalists program with physicians concerned with the general medical care of hospitalized patients
• Strong physician recruitment
• Establishing affiliation with University of Pennsylvania Health System for oncology and cardiology
“Given New Jersey’s very difficult healthcare environment, we are very pleased with what we have been able to accomplish over the past three years,” said Joanne Carrocino, Cape Regional’s president and CEO.
“These accomplishments are due to the strong collaborative efforts of our physicians, hospital staff and board of trustees.”
Part of the “difficult environment” of which Carrocino spoke could be that funding for hospitals in New Jersey was cut substantially in this year’s state budget.
“This budget cuts $111 million, or 15.5 percent, from the charity care program that is designed to care for New Jersey’s uninsured residents. Patients will continue to receive the care – that’s a requirement on hospitals, written in state law. The brunt of this cut will be borne by the hospitals themselves,” NJHA President Betsy Ryan said in a June 30 press release.
“The timing and the severity of these cuts couldn’t be worse. New Jersey has lost seven hospitals to closure in the last 18 months, and an eighth hospital plans to close its doors in the coming days. Five others have declared bankruptcy. Of the 75 hospitals that remain, half are losing money.”
The latest victim was the 130-year-old Muhlenberg Regional Medical Center in Plainfield, Union County, which was scheduled to close its doors at the stroke of midnight on Aug. 14.
Because of the state’s struggling hospitals, Gov. Jon S. Corzine Aug. 8 signed a bill that allows the state Department of Health and Senior Services to intervene when it determines that a hospital is in fiscal distress.
But the difficulties seen by the state healthcare system as a whole, don’t seem to be affecting Cape Regional or some other local hospitals.
On April 25, 2007, Fitch also upgraded the bond rating of AtlantiCare Regional Medical Center from “A” to “A+” with a stable rating outlook on an outstanding debt of $105.6 million as well as a new bond issue of $113.5 million.
Fitch cited AtlantiCare’s strong financial profile, dominant market position, solid growth and management initiatives as reasons for the upgrade.
According to Steve Fillebrown, director of research and investor relations at the NJ Health Care Facilities Financing Authority (NJHCFFA), the South Jersey Healthcare Regional Medi-cal Center in Vineland has a Moody’s bond rating of “A3” or the equivalent to an “A-” from Fitch.
The NJHCFFA is the independent state agency that issues municipal bonds for New Jer-sey’s health care organizations.
Shore Memorial Hospital doesn’t have a public rating with any of three agencies because payments of their loans are guaranteed by a third party, Fillebrown said.
Contact Hart at (609) 886-8600 Ext 35 or at: jhart@cmcherald.com