Moody’s Investor’s Services, a major bond rating agency, recently upgraded Fletcher Allen Health Care’s bond rating from Baa 1 to A3 with a “stable” outlook for the future.
Moody’s said the upgrade is based on an analysis of the Burlington hospital’s parent company, Fletcher Allen Partners. The four-hospital system has shown significant growth and strong operational performance, according to the ratings agency.
An A rating is the third-highest rating Moody’s gives, and the numeral 3 indicates that the rating is at the lower end of the category, just as the hospital’s previous Baa 1 rating reflected the higher end of that rating category.
The new rating, combined with a recent upgrade from the firm Fitch Ratings, will help lower the hospital’s cost of borrowing, John Brumsted, CEO of Fletcher Allen Health Care and Fletcher Allen Partners, said in a statement.
“As we move forward with necessary capital projects to improve our system, the cost of funding those projects will be substantially reduced. This is another example of bending the cost curve to benefit not only the system, but also all of the patients who come to us for care,” Brumsted said.
Fletcher Allen Partners was formed in 2011 and now includes two hospitals in northern New York, Fletcher Allen Health Care and Central Vermont Medical Center in Berlin.
The hospital system’s revenue has grown to $1.6 billion from $950 million in fiscal year 2011 and has “strong market share” in Vermont and northern New York, according to Moody’s.
“Flat population trends in Vermont require [Fletcher Allen] to seek volume growth by increasing patient referrals from smaller regional hospitals in Vermont and parts of New York,” according to Moody’s analysis.
Brumsted said during recent hospital budget hearings that the network is in talks with organizations in Vermont and New York to further “gain scale,” and Fletcher Allen Partners would likely seek regulatory approval for those deals in 2015.
Fletcher Allen’s rating could be upgraded again if the network is “able to maintain strong operating performance at the system level,” Moody’s said.
The rating could be downgraded if the “scope of construction projects increases significantly,” or if the hospital’s borrowing to finance those projects increases “materially” beyond its current plans.
The combined fiscal year 2015 budget for Fletcher Allen and Central Vermont approved by lawmakers this month sets aside $76 million for capital and facility-related projects.
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