Peculiarities of Hospital Projects Rating (Part 2)

Hospital ratings

This series addresses the key factors that shape a Hospital’s creditworthiness and how these assessments impact healthcare institutions’ financial stability and growth prospects. In this second part, we focus on Confluence Health Obligated Group in the United States, which received an upgrade of its Issuer Default Rating (IDR) and Revenue Bond from ‘A-’ to ‘A’ in May 2024.

The upgrade was attributed to Confluence’s stronger balance sheet metrics, consistently positive operating performance, and dominant market position. As noted by the rating agency, “Confluence had total unrestricted cash and investments of approximately $295.2 million, translating into about 122 days of cash on hand and a cash-to-adjusted debt ratio of approximately 170%, both strong metrics. This is an improvement from the prior year’s $253 million in unrestricted cash and investment balance, equating to 106 days of cash on hand and a 136% cash-to-adjusted debt ratio.”

Confluence has generated positive operating income over the past five fiscal years, despite significant macroeconomic and inflationary challenges, particularly in the Pacific Northwest. Rating agencies anticipate that the organisation will continue to make meaningful capital investments to maintain its facilities and its dominant long-term market position, which remains a primary credit strength.

The Bonds are secured by the gross revenue pledge of the obligated group, which includes Confluence Health, Central Washington Hospital (CWH), and Wenatchee Valley Hospital (WVH). Additionally, the bonds are secured by a mortgage pledge on Central Washington Hospital’s facilities in Wenatchee, Washington. Wenatchee Valley Medical Group (WVMG), while affiliated with Confluence Health, is not obligated to pay the bonds.

The key rating drivers for the revenue bond include a strong and dominant market position in the service area, positive and satisfactory operational performance, an elevated capital expenditure program, and a consistent and strong financial profile. The ‘A’ financial profile assessment reflects Confluence’s improved liquidity and manageable leverage position, supported by the organisation’s consistent and positive historical operating performance.


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