Financial watch rating issued for Butler Health System
Fitch Ratings has issued a rating watch for the Butler Health System related to $79 million in revenue bonds.
The rating comes after the health system reported to Fitch an operating loss of $11.2 million for the 2021 fiscal year. Through the nine months ending March 31, 2022, the system's operating loss was $8.2 million.
The financial services company based in New York placed the health system on the watch in an announcement last week.
BHS's operating profile assessment is mid-range, reflecting operational challenges that have been exacerbated by the COVID-19 pandemic — the necessary postponement of elective and outpatient surgeries and labor cost inflation, according to Fitch.
BHS has had an “A” rating with a negative outlook with Fitch since August 2020.
BHS's leverage profile has remained solid despite operational challenges, according to the Fitch report, which provide an adequate financial cushion for the “A” category assessment despite near-term operating pressures.
The health system also has a $20 million line of credit which remains undrawn, and a pension liability funded at a level above 100%.
Fitch said the health system has had historically strong profit margins, which deteriorated with the pandemic and remain constrained. However, the margins actually improved relative to fiscal year 2020 with the support of about $45 million from the Coronavirus Aid, Relief, and Economic Security Act stimulus money.
BHS and Excela Health signed a letter of intent June 1 to merge and form a new health system. According to Fitch, the merger would create a five-hospital health system, which includes Clarion Hospital, with combined board representation and more than $1 billion of total annual revenues — improving BHS’s rating.
Fitch has not rated Excela Health's debt.
