Moody’s Investor Services reaffirmed the Erlanger Health System’s Baa2 bond rating on Wednesday. Moody’s analysts attributed the latest rating assessment to “a new dynamic chief executive officer with operational improvement experience at large tertiary academic hospitals” who “will lead the turnaround initiatives.”
The report noted that Erlanger is working toward additional supplemental payments through the Public Hospital Supplemental Payment Pool, a designated pool for safety net hospitals in Tennessee.
Erlanger’s designation “as a ‘safety net’ hospital has resulted in annual state-funded essential access payments and new disproportionate share payments, although funding of programs are not guaranteed into the future,” analysts stated.
“The affirmation from Moody’s is a vote of confidence in our strategies to improve our financial position,” stated Kevin M. Spiegel, FACHE, Erlanger president and CEO. “This is a call to action for all Erlanger associates to move forward with our cost saving initiatives and growth strategies.”
Moody’s analysts also noted Erlanger’s strong presence in the region. “Erlanger garners a wide regional draw with unique high end acute care services (kidney transplantation, PICU, NICU III, Level I trauma) and a strong market share of 31.3 percent in the total 15-county service area,” the report said. “In addition, Erlanger receives over 4,800 patient referrals (mostly tertiary cases, which represent about 18 percent of its total admissions) from parts of Georgia, Alabama and Tennessee which are outside its 15-county service area.”
In discussing Erlanger’s financial picture, the Moody’s report noted that “further operational improvement is projected for FY 2014” at Erlanger. Analysts also stated that Erlanger’s conservative debt structure and the strong economy of the city, county, and region contributed to Moody’s reaffirmation of Erlanger’s rating.