The Ector County Hospital District Board met for their regularly scheduled meeting Tuesday night to discuss their updated Fitch Rating, which showed no change from last year.
Medical Center Hospital Chief Financial Officer Robert Abernethy told the board they talked with a representative from Fitch last month, and were affirmed with a BB+ rating with a stable outlook. While he said they had hoped to receive a BBB rating, he said the committee only chose to affirm the rating.
“I think the outlook is positive from the standpoint that if we continue along the route that we are, we should see that bond rating come back up,” Abernethy told the board.
The Fitch Rating is stabilizing after several years of downgrades, since it was first downgraded from an A- to a BBB in 2016.
“We’ve stabilized where we are, we are no longer being downgraded, and the future looks stable,” he said.
The key rating drivers, he continued, related to revenue defensibility, which was rated a BBB, due to the hospital having a leading market share in the area, but remaining to energy price volatility. They had a BBB rating for operating risk, and Abernethy said they were recognized for strong profitability for the year and an expectation of profitability moving forward, and a BB rated financing profile. Abernethy said it is critical for the hospital to maintain a positive cash flow, and pointed to the hospital finishing March at 74.5 days of cash on hand as a good sign, the highest the hospital has had in several years.
Part of Fitch’s criteria includes Fitch’s adjusted net pension liability of $155 million for the hospital district in 2018. While Abernethy said that liability was 90% funded, Abernethy said that isn’t included in the report, only the $155 million, which he said makes it extremely difficult to increase their bond rating.
“As unfair as we may think it is, it is the way it is and that’s how they rate it,” he said.
CEO RickNapper called the issue an issue of changing accounting principles, and not a MCH issue, as the $155 million was not taken into account prior to 2016, when MCH had an A- rating.
“You ought to be dadgum glad that we are at a BB+ because this organization is doing much better than it did in March of 2016,” Napper said. “We really couldn’t have expected it to go up.”
Napper said organizations across the country saw their ratings go down due to the change in accounting, and said he believed the hospital would get back to a BBB rating.
“The unfortunate thing with ratings is they go down much faster than they go up,” Napper added.
What Napper did not address during the meeting were rumors of his possible resignation or retirement, after his Odessa house was placed on the market last week and District 6 Board Member Mary Thompson said he would be retiring, before backtracking and saying she meant he would be retiring eventually.
This was also Thompson’s last meeting, after she was defeated by incoming board member Wallace Dunn in the Saturday election. She congratulated Dunn, and Dunn gave a brief statement, thanking Thompson for her near 30 years of service on the board and said he was looking forward to working with them.
The board also approved several capital expenditure requests for a UDI tracker, Medtronic ValleyLab Electrosurgical units, a deal to lease 18 Draeger Perseus A500 anesthesia machines, a 3T Verio MRI Evolve Upgrade, and a Sonisite X-porte ultrasound unit.
IN OTHER BUSINESS, THE BOARD
- Approved regular meeting minutes, April 2, 2019.
- Approved special meeting minutes, April 12, 2019.
- Approved special meeting minutes, May 2, 2019.
- Approved Federally Qualified Health Center Monthly Report, March 2019.
- Presented a check for $40,391.85 to March of Dimes and two $5,000 checks to MCH Auxiliary and Nursing Education.
- Approved medical staff bylaws and documents.
- Heard a TTUHSC-Permian Basin report.
- Heard presentations and awards for May 2019 Associates of the Month and April Patient Satisfaction Winners.
- Heard the quarterly investment report for Q2 of Fiscal Year 2019 and the financial report for March 2019.
- Approved MCH ProCare Provider agreements.