Business Wire reports that Fitch Ratings has affirmed the ‘BBB+’ long-term rating on the following Baptist Health Care Corporation’s (BHCC) outstanding debt:
–$152,662,000 Escambia County, FL Health Facilities Authority revenue bonds (Baptist Hospital Inc Project), series 2010A;
–$22,615,000 Escambia County, FL Health Facilities Authority taxable variable-rate demand bonds (Baptist Hospital Inc Project) series 2010B.
And the company, that owns operates Baptist Hospital, a 492-bed hospital in Pensacola; Gulf Breeze Hospital, a 67-bed acute care hospital; Baptist Manor, a 170-bed skilled nursing facility, and other health care related entities, has had its outlook upgraded to stable from negative.
According to Fitch, the Outlook revision reflects BHCC’s (which has 33 percent of the market) sustained improved operating performance, since its weaker performance in fiscal 2010 (Sept. 30 year end). It credits the healthcare system’s expense reductions in addition such growth strategies as the increase in employed physicians and enhancing services in cardiology and orthopedics.
The top market position in the Pensacola market is held by Sacred Heart Hospital (part of Ascension Health, rated ‘AA+’ by Fitch) with 39 percent and West Florida Hospital (part of HCA) has 21 percent.
BHCC exceeded its fiscal 2011 budget and ended the year with a 2.5% operating margin compared to 1.0% in fiscal 2010, according to Fitch.
Solid operating performance has been sustained through the first quarter of fiscal 2012 (Oct. 1-Dec. 31, 2011) with a 2.4% operating margin ($4.3 million) compared to 1.0% the same prior year period. Management is budgeting an operating margin of 2.25% for fiscal 2012, which incorporates the impact of a reduction in Medicaid rates ($7 million).
With the failed attempt to purchase West Florida in 2008, BHCC has embarked on reinvesting in its plant which has a current average age of 12 years. The series 2010 bond proceeds have funded several projects including additional capacity at Gulf Breeze Hospital (two ICU beds and 10-bed expansion), which has helped the revenue growth. Current projects include the expansion of surgical suites and critical care beds at the main hospital, which BHCC celebrated yesterday.
Beyond the bond funded projects, capital spending is projected to be limited to routine needs and information technology. The capital plan will be funded from cash flow and will mirror depreciation expense. Total capital spending is projected at $54.4 million in fiscal 2012 ($21 million of project funds remaining from series 2010 bond proceeds), $31.6 million in fiscal 2013 and $33.5 million in fiscal 2014.
Fitch also reports that admissions have increased 6.7% in the first quarter of 2012 compared to the same prior year period driven by increases in orthopedics and cardiology. Volume has increased at BHCC’s Andrews Institute, where Dr. James Andrews has been practicing full time since April 2011.