Catholic Health East, which owns 22 hospitals and is rated A1, A, and A- by Moodys Investors Service, Standard & Poors and Fitch Ratings, ended its fiscal year in December with roughly 47 fewer days of cash than the prior year. Days of cash is a key measure of financial health. It is the number of days a system can operating on savings alone. Robert Stanek, the Newtown Square, Pa.-based systems president and CEO, as he left a question-and-answer session, said the systems credit rating means it could gain entry to tight credit marketsthough it would cost morebut executives have put their focus on rebuilding Catholic Health Easts balance sheet.
SSM Health Care, a 15-hospital system based in St. Louis with AA- ratings from Standard & Poors and Fitch Ratings, reported its reserves were nearly cut in half to 166 days at the end of 2008 from 243 days the prior year. Texas Health Resources, rated A3 by Moodys and AA- by Standard & Poors, saw its cash plunge to around 165 days from roughly 221 days at the close of 2007. The Arlington, Texas-based system owns 13 hospitals. And the prior year wiped 50 days of cash from the balance sheet for University Hospitals, rated A2 and A by Moodys and Standard & Poors, an eight-hospital system based in Cleveland, Ohio.
Systems with June and September fiscal years did not emerge unscathed. Ascension Health, the largest U.S. Catholic and private not-for-profit health system with a record of healthy profits and a reputation for sophisticated financial management, reported its cash reserves dipped 12% in 2008 from the prior year.
Ascension, a 77-hospital system with a June 30 fiscal year, finished fiscal 2007 with 207 days worth of cash. By June 30, 2008 the figure dropped to 185 days and it continued to slide to 145 days as of April 30, according to materials distributed to the more than 500 attendees.
Overall, conference presenters, which account for over $33.8 billion of long-term debt, reported an aggregate operating income of $3.5 billion for the most recent fiscal year, but after factoring in investments, aggregate net income dropped to -$1.8 billion. Presenters average operating margin was 2.5% but the average profit margin was -2.3%.
Robert Shapiro, senior vice president and chief financial officer for North Shore-Long Island Jewish Health System in Great Neck, N.Y., said he has not seen such uncertain credit markets since the Allegheny Health and Education Research Foundation collapsed into bankruptcy in 1998 with more than a half-billion in outstanding debt.
North Shore-LIJ, which owns 10 New York hospitals and holds an investment grade A3 rating from Moodys Investors Service and an A- from Fitch Ratings, will soon seek $400 million from investors to add an eight-story tower to its Katz Womens Hospital at Long Island Jewish Medical Center in New Hyde Park, N.Y.
For Shapiro, the shaky credit markets mean he cannot be sure of how North Shore will structure its debt or how much interest the system will ultimately pay to borrow, he said, I have thoughts.
Shapiro said though widely acknowledged, it is important to make clear to investors the extraordinary stress on balance sheets that stems from the recent volatile investment market. You have to explain that, he said.
Melanie Evans covers finance and governance news. She also covers healthcare business news in Connecticut, New Jersey, New York and Pennsylvania.
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