Fitch Affirms Greenwich Hospital's (CT), Rev Bonds at 'AA-'; Outlook Stable

NEW YORK--()--Fitch Ratings affirms the 'AA-' rating on the following hospital revenue bonds issued by the Connecticut Health and Educational Facilities Authority on behalf of Greenwich Hospital (the hospital):

--$40.2 million series 2008.

The Rating Outlook is Stable.

SECURITY

The bonds are secured by a pledge of the gross receipts of the obligated group.

KEY RATING DRIVERS

LOW DEBT BURDEN: The hospital has a very modest debt burden with maximum annual debt service (MADS) equating to 1.2% of revenue in fiscal 2013. Robust fundraising efforts as well as the hospital's operations fund the hospital's capital needs, which reduce the need to issue additional debt. Cash equal to 353.4% of long-term debt at fiscal year-end (FYE) 2013 mitigates the risk associated with the hospital's 100% variable-rate debt profile. MADS coverage by EBITDA remains excellent at 9.7x through the eight-month interim period ended May 31, 2014 (the interim period).

CONSISTENT PROFITABILITY: Greenwich Hospital has a consistent record of operating profitability despite market-wide volume deterioration. The hospital is able to maintain strong margins by effectively managing costs and continuing to implement operating efficiencies. Through the interim period the hospital achieved a strong operating EBITDA margin of 11.2%, which is in line with the 11.3% in fiscal 2013.

EVOLVING COMPETITIVE LANDSCAPE: New York has seen a considerable amount of activity involving hospital affiliations and strategic relationships with major New York hospital providers. The more consolidated competitive environment has not had a measurable negative impact on Greenwich Hospital's market share, but the potential remains.

MEMBER OF YALE-NEW HAVEN: The hospital continues to benefit from its relationship with Yale-New Haven Health System (YNHHS; rated 'AA-' by Fitch), which provides Greenwich Hospital with supply savings, certain management services and clinical support in several subspecialties.

RATING SENSITIVITIES

MAINTENANCE OF CREDIT PROFILE: Fitch expects that Greenwich's operating performance will be stable due to its consistent operating performance, low debt load, and the benefits of being part of YNHHS.

CREDIT PROFILE

Greenwich Hospital consists of an acute-care hospital (206 beds) operating in Greenwich, CT. The hospital provides medical, surgical, dental and other health care services in its primary service area of Fairfield County, CT and Westchester County, NY.

Fitch's analysis is based on the consolidated entity, Greenwich Hospital Health Care Services, Inc. and subsidiaries, which had total revenue of approximately $343 million in fiscal year 2013.

LOW DEBT BURDEN

At FYE 2013 Greenwich Hospital had MADS coverage by EBITDA of 9.8x, MADS at a very moderate 1.2% of revenues, and a cushion ratio of 31.7x, all well ahead of Fitch's respective 'AA' category medians of 5.0x, 2.6% and 23.4x. Through the interim period, MADS coverage by EBITDA was reported at 9.7x, cushion ratio at 38.5x, and MADS as percent of revenues further declining to 1.1%.

Fitch expects that the hospital will maintain its current operating performance, which should provide for continued strong coverage of a low debt burden.

CONSISTENT PROFITABILITY

Greenwich Hospital's performance is marked by a large degree of stability owing to its market position in a service area with very favorable socioeconomic characteristics. The hospital produced operating income of $15.7 million in fiscal 2013 (year-end Sept. 30), about a 23% improvement over the prior year and equal to operating and operating EBITDA margins of 4.6% and 11.3%, respectively. Management expects to end fiscal 2014 with an operating income in excess of $16 million, which Fitch views as reasonable and attainable given management's emphasis on achieving greater operating efficiencies and cost savings.

EVOLVING COMPETITIVE LANDSCAPE

Greenwich Hospital has managed to maintain a steady market share, despite declining inpatient utilization across the service area and an increasingly competitive environment. A previously segmented market has become more consolidated over the past year in Westchester County, from which Greenwich Hospital generates 50% of its total discharges. As the competition in Greenwich Hospital's service area continues to evolve, the hospital will continue to leverage its relationship with YNHHS in order to achieve cost savings, maintain market stability and remain a key provider in the area.

MEMBER OF YALE NEW HAVEN

The relationship with YNHHS has continued to be a positive driver. The cancer program at Greenwich Hospital has been successful through leveraging the system's brand name and using the protocols of the Smilow Cancer Center at Yale-New Haven Hospital. Several oncologists were recruited for the Northeast Medical Group (NEMG), which will allow Greenwich to remain competitive with Memorial Sloan-Kettering (rated 'AA') as they are opening a new outpatient treatment center in Harrison, NY. NEMG is a 470-physician multi-specialty medical group affiliated with all three YNHHS hospitals, comprising Yale-New Haven, Bridgeport Hospital, and Greenwich Hospital. Fitch views the relationship with YNHHS and the strategic direction of the component hospitals favorably.

DISCLOSURE

Greenwich Hospital covenants to disclose annual audits within 150 days of fiscal year-end to MSRB's EMMA system.

Additional information is available at 'www.fitchratings.com'

Applicable Criteria and Related Research:

--'Revenue-Supported Rating Criteria', June 16, 2014;

--'Nonprofit Hospitals and Health Systems Rating Criteria', May

30, 2014.

Applicable Criteria and Related Research:

U.S. Nonprofit Hospitals and Health Systems Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=746860

Revenue-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750012

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=840518

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Contacts

Fitch Ratings
Primary Analyst
Eva Thein
Senior Director
+1-212-908-0674
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Secondary Analyst
Katie Proux
Analyst
+1-312-368-3348
or
Committee Chairperson
Emily Wong
Senior Director
+1-415-732-5620
or
Media Relations:
Elizabeth Fogerty, +1-212-908-0526 (New York)
elizabeth.fogerty@fitchratings.com

Sharing

Contacts

Fitch Ratings
Primary Analyst
Eva Thein
Senior Director
+1-212-908-0674
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Secondary Analyst
Katie Proux
Analyst
+1-312-368-3348
or
Committee Chairperson
Emily Wong
Senior Director
+1-415-732-5620
or
Media Relations:
Elizabeth Fogerty, +1-212-908-0526 (New York)
elizabeth.fogerty@fitchratings.com