Fitch Affirms Methodist Hospital of Southern California at 'BBB+'; Outlook Stable.
ENPNewswire-September 1, 2021--Fitch Affirms Methodist Hospital of Southern California at 'BBB+'; Outlook Stable
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Release date- 31082021 - Fitch Ratings has affirmed the 'BBB+' Issuer Default Rating (IDR) and revenue bond rating on the series 2018 refunding bonds issued by the California Statewide Communities Development Authority on behalf of Methodist Hospital of Southern California (MHSC).
The Rating Outlook is Stable.
SECURITY
Debt payments are secured by a pledge of gross revenues of the obligated group.
ANALYTICAL CONCLUSION
The 'BBB+' rating and Stable Outlook reflect Fitch's expectation for MHSC's operating profitability to improve following the disruption from the pandemic and upon realizing the benefits of their anticipated affiliation with USC Keck School of Medicine. Fitch expects MHSC to generate cash flow sufficient to continue building liquidity and improve leverage metrics through the next several years. The rating also reflects MHSC's stable market position as the leading community provider in its primary service area in the highly competitive and fragmented northeastern Los Angeles market.
MHSC's net adjusted leverage metrics have improved over recent years, and Fitch expects this trend to continue through its forward-looking scenario. Positive rating action is precluded at this time due to continued operating pressure from the pandemic, but Fitch expects volumes to rebound steadily over the coming year, which may improve the Outlook.
KEY RATING DRIVERS
Revenue Defensibility: 'bbb'
Stable Share in Competitive Market
MHSC's midrange revenue defensibility reflects a stable primary service area (PSA) market share of about 18% that is marginally leading, but not dominant, in its competitive and fragmented northeastern Los Angeles County service area. Huntington Hospital, recently affiliated with Cedars-Sinai Health System, is the major competitor with about 15% market share. The service area is broad and diverse with generally strong economic indicators and population growth and should continue to support the payor mix with Medi-Cal and self-pay a relatively low 18% of gross revenues. MHSC is a designated comprehensive stroke center. Other core service lines include cardiovascular services, rehabilitation and orthopedics, and MHSC is well positioned in its market to capture the less tertiary acute care volume.
MHSC recently agreed to a member substitution agreement with Keck...
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