The Tribune Democrat, Johnstown, PA

October 13, 2012

Hospital receives bond upgrade

Randy Griffith
rgriffith@tribdem.com

— Conemaugh Health System’s financial condition continues to improve, a leading Wall Street investment adviser announced.

The health system’s latest bond package was upgraded from BBB to BBB+ by Standard and Poor’s Rating Services.

The new rating puts Conemaugh between “adequate capacity” and “strong capacity” to meet financial commitments, but notes it is also between “more subject to adverse economic conditions” and “somewhat susceptible to adverse economic conditions,” as defined by the rating service.

“The upgrade reflects our assessment of Conemaugh’s established trend of healthy operating profitability and increasing balance sheet strength since fiscal 2009, combined with a dominant market position within its primary service area of Cambria and Somerset counties,” Standard & Poor’s credit analyst Charlene Butterfield said in her report.

The bond upgrade identifies S&P’s opinion of the credit rating for tax-free bonds Conemaugh can “sell” to investors, who essentially are lending money to the system.

Hospitals typically sell bonds to raise funds for construction projects, technology upgrades or to restructure existing long-term debt.

Bonds identified in the report were issued in 2005 and 2010 through South Fork Municipal Authority, totaling just more than $102 million.

By adding the “plus” to the BBB rating, S&P shows the health system’s credit score has improved, compared with other organizations, Butterfield said.

“We are simply saying that we recognize there is increasing strength,” Butterfield said in a telephone interview. “We are not saying that something is a good or bad investment. That’s not what we do.”

Conemaugh’s upgrade comes at a time when some hospitals are receiving credit downgrades.

Seven acute-care hospitals and health systems around the nation received credit downgrades during the past month, health-care advisers at HFA Partners report.

Strong financial health is a team effort at Conemaugh, Chief Financial Officer Edward DePasquale said in a press release.

“We are thankful to our physicians, administration, board and employees for working very hard to make this improvement possible,” DePasquale said.

“Our overall financial profile has gained momentum during the past three fiscal years.”

The Johnstown-based health system’s strong operating margins and dominant business position led to the upgrade, Butterfield reported.

Management’s focus on boosting revenues is expected to continue strengthening the bottom line, she added.

“Great effort has been placed on increasing efficiency and productivity while controlling costs,” Conemaugh President and Chief Executive Officer Scott Becker said. “We are extremely proud of this effort.”

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