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Fitch: Lenox Hill & Mount Sinai Hospitals (NY) Unaffected By Commission Recommendations

Posted on: Friday, 8 December 2006, 18:00 CST

The Commission on Health Care Facilities in the 21st Century (the Commission), which was created to review and improve New York State's acute and long-term care delivery systems, released its recommendations, 'A Plan to Stabilize and Strengthen New York's Health Care System,' earlier in December 2006. The Commission's recommendations will become law unless both the New York State Senate and Assembly reject all recommendations by Dec. 31, 2006. While the Commission's recommendation for both Lenox Hill and Mount Sinai should have positive implications they are not expected to impact either organizations bond ratings.

Of the New York City hospitals recommended to close or directly affected by another closure or reorganization, Fitch rates outstanding bonds for Lenox Hill Hospital and Mount Sinai Hospital.

Fitch rates $145,600,000 Dormitory Authority of the State of New York revenue bonds (Lenox Hill Hospital Obligated Group), series 2001, 'BB' with a Negative Outlook. The Commission recommended that Manhattan Eye Ear and Throat Hospital (MEETH), which is a non-obligated member and sponsored by Lenox Hill Hospital (Lenox Hill), downsize all 150 beds and be converted to a fully functional ambulatory surgery center. Prior to the Commission's recommendation, Lenox Hill and MEETH had been in merger negotiations that will result in the same reorganization effect, which according to management, is likely to occur during the first half of 2007. Lenox Hill and MEETH fully expect to consummate a merger and to retire all of MEETH's outstanding $37.5 million mortgage loan from a combination of pre-approved grant monies from The Health Care Efficiency and Affordability Law for New Yorkers (HEAL-NY) $12.5 million, MEETH's existing unrestricted cash and investments $12.5 million, and an upcoming sale of certain real estate owned by MEETH. Fitch believes the merger of MEETH into Lenox Hill will have positive medium term implications for Lenox Hill, given potential efficiencies to be realized through consolidation.

Fitch rates the $525,460,000 Dormitory Authority of the State of New York revenue bonds (Mount Sinai-NYU Health System Obligated Group), series 2000A, and $101,400,000, series 2000C, 'BBB-' with a Stable Outlook. This Obligated Group currently consists of only The Mount Sinai Hospital (Mount Sinai). The Commission recommended that North General Hospital (North General) enter into a stronger corporate relationship with Mount Sinai. Prior to the Commission's recommendation, Mount Sinai and North General had been in discussions about establishing a passive parent arrangement. Under this proposed arrangement, it is contemplated that Mount Sinai would become a participant in the governance of North General, but the institutions would not merge and Mount Sinai would not become responsible for any of North General's liabilities. A permanent stronger corporate relationship between Mount Sinai and North General could conceivably provide some sustained opportunities from clinical programmatic enhancements, increased patient volumes, and improved services to the community.

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

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