Moody’s Investors Service has upgraded Erlanger Health System’s rating outlook to “positive” and reaffirmed Erlanger’s Baa2 bond rating. In making the announcement, the rating agency stated the positive rating outlook “reflects our expectations that with Erlanger’s leading and growing market presence, and performance strategies, improved operating cash flow generation will be sustained.”
The Moody’s report came out a day after Fitch Ratings-New York upgraded Erlanger’s bond rating from a BBB to BBB+, citing “leadership of a new CEO, increased volumes and a sharp improvement in operating results.”
Erlanger Chief Financial Officer Britt Tabor said, “It is particularly rewarding to see our efforts recognized by Moody’s on the heels of a very positive report and upgrade by Fitch this week.”
In their analysis, Moody’s analysts wrote that Erlanger’s performance over the past two years was driven by a number of initiatives implemented since the arrival of the new CEO in April 2013. These initiatives equated to revenue growth of 15% in FY 2015 over FY 2014.
Of the current fiscal year, Moody’s also noted that Erlanger’s management “is projecting operating performance similar to 2015 and continues to focus on productivity, revenue cycle and supply chain initiatives."
“Erlanger is the midst of several capital projects which are expected to alleviate capacity needs and allowed continued volume growth,” the report stated, citing major expansion efforts at the downtown campus, at Erlanger East Hospital, construction of a children’s ambulatory center, stroke and neurosciences center and installation of a new IT system, expected to go live in 2017.
Moody’s analysts noted that “after several years of weak performance, Erlanger has reported improving operating cash flow margins over the last two years, reaching an all-time high in FY 2015 of 10.6% compared to 7.6% in the prior year.”
“To have received an upgrade from Moody’s to positive and a reaffirmation of our Baa2 bond rating is another real testament to our physicians, our hard-working team and strategic initiatives,” said Erlanger President and CEO Kevin M. Spiegel, FACHE.