A national credit rating agency has upgraded Akron Children’s Hospital’s credit worthiness from A+ to AA-, citing strong market share and continued growth.
According to Fitch Ratings, the credit rating upgrade reflects Children’s “continued liquidity growth, strong historical operating performance and above median debt service coverage.”
The agency also revised the hospital’s financial outlook from positive to stable.
The rating report cites Children’s current construction project to nearly double the size of its outpatient Considine Professional Building, which will be complete in April 2018. Fitch said it believes the hospital has enough capacity at the higher rating to absorb the financial impacts of the $84 million construction project.
The review covers $195 million worth of debt.
“The upgrade of Akron Children’s Hospital’s bond rating to ‘AA-’ status is a significant achievement for the organization and represents the strong support for our pediatric services among families of Northeast Ohio,” Children’s Chief Financial Officer and Treasurer Mike Trainer said in a prepared statement. “The Akron Children’s Board of Directors and management team continue to demonstrate excellent fiscal stewardship commensurate with the trust bestowed by the communities we serve.”
In the ratings report, the agency also said that Children’s revenues have increased by 29 percent in the last four years, “due to its continued service line expansion, the opening of additional locations and collaborations with adult providers.”
Total revenues for the hospital system were $808 million in 2016, according to the Fitch report.
The hospital has two main campuses, including the 303-bed main Akron campus and a 43-bed campus in Boardman, as well as inpatient pediatric services at multiple community hospitals throughout the region, and outpatient services at various centers.
The report also said “despite the increasingly competitive market, Akron Children’s pediatric market share grew 31.6 percent from 2008 to 2016, reaching 81.3 percent in its 10-county primary service area.”
Fitch said it expects Children’s to maintain its strong financial profile, “despite an expected period of heavier capital spending.” However, Fitch said a key credit concern could be that Children’s, like other pediatric hospitals, has a high concentration of patients covered by the state-run Medicaid program, which accounted for 51 percent of gross revenues for 2016.
Betty Lin-Fisher can be reached at 330-996-3724 or blinfisher@thebeaconjournal.com. Follow her @blinfisherABJ on Twitter or www.facebook.com/BettyLinFisherABJ and see all her stories at www.ohio.com/betty