• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Fitch Affirms Children's National Medical Center (DC) at 'A-'; Outlook Stable

Posted on: Friday, 7 December 2007, 18:00 CST

Fitch Ratings has affirmed the 'A-' rating on $150 million of outstanding debt for the benefit of Children's National Medical Center (CNMC). The Rating Outlook is Stable.

The rating affirmation takes into account an expected $220 million financing that the hospital is planning to issue in spring 2008. The new debt will finance several major projects including the expansion of operating rooms and NICU, and the build-out of shelled space at the hospital campus. Fitch has not assigned a rating to the proposed 2008 bond issue, but expects to do so closer to the date of issuance.

The 'A-' is supported by CNMC's strong national and international reputation in pediatric medicine and research, its dominant market position in its region, the continuing operating performance improvement, its strong physician alignment strategies and its excellent fundraising capabilities and foundation support. CNMC is the only pediatric Level I trauma center in Washington, DC and only one of two pediatric trauma centers in the major Washington, DC, metropolitan area. Both U.S. News and World Report and the Leapfrog Group have ranked Children's National Medical Center among the top pediatric hospitals in America. CNMC has the dominant market share in its primary service area at 59.8%. In fiscal 2007, CNMC earned $44 million from operations (6.3% operating margin) and $63.4 million in excess income (8.9% excess margin), well ahead of Fitch's 2007 medians for the category of 3.2% and 5.6%. As of Sept. 30, 2007, the Children's Hospital Foundation raised $117.5 million in cash with an additional $87.3 million in pledges in support of the system's long-term capital campaign.

Credit concerns include the hospital's weak liquidity relative to Fitch's 'A' category medians, exposure to governmental payors and construction risk associated with its extensive capital program. At the end of fiscal 2007, CNMC had $188.3 million of unrestricted cash and investments which calculates to 114 days of cash on hand, compared to Fitch's median for the category of 185 days. As is typical with pediatric hospitals, CNMC has a high exposure to Medicaid at 48.1%, which makes the hospital vulnerable to potential changes in reimbursement policies and budgetary pressures. The proposed $220 million bond issue is a part of a multi?year major capital program with an estimated total cost of $535 million. Since the majority of funding for the various projects is expected to come from the hospital's future operating cash flow, along with debt and fund raising activities, continued strong financial performance is critical in supporting the hospital's future capital plans.

The Stable Rating Outlook is based on Fitch's expectation that CNMC will continue to maintain its strong market presence and continue its solid operating margins over the medium term. After several years of operational volatility, CNMC's operating performance stabilized in 2005 due to strong revenue growth, increases in managed care rates and higher acuity levels.

Located in Washington, DC, CNMC is a nationally recognized full-service tertiary and quaternary pediatric hospital with 283 licensed and 240 staffed beds. CNMC had total operating revenues of $695 million in fiscal 2007. CNMC has covenanted to provide audited annual financial statements and quarterly disclosure to bondholders. Disclosure information will be disseminated through the NRMSIRs.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

Source: Business Wire

More News in this Category