Moody’s Investors Services has affirmed the Baa2 rating for the Erlanger Health System and assigned the Chattanooga-based health system a positive outlook in its latest rating analysis.
In its 2018 ratings report, Moody’s analysts stated that Erlanger’s Baa2 ratings “reflects very strong revenue and market share growth across the past four years as the system has recruited new physicians and specialists, invested in new facilities and clinical programs and rebuilt its brand in the southeastern Tennessee market.” The latest ratings report also noted that Erlanger’s “positive outlook reflects our expectation of improved performance and liquidity growth during the last half of fiscal 2018 as many of the nonrecurring costs of the IT installation decline.”
Referencing the latest Moody’s report, Erlanger Chief Financial Officer Britt Tabor, FACHE noted the health system’s payment schedule to EPIC was front-loaded the first three years of implementation, with $11 million paid to EPIC in fiscal year 2016, $33 million in 2017 and $26 million this fiscal year.
“Not only did Erlanger execute a successful ‘Go Live’ of our conversion to EPIC last October, but our largest expenses associated with this three-year transition will end this fiscal year,” Mr. Tabor said. This, he added, “should have a significant positive impact on our future revenue growth picture.”
Factors that could contribute to future ratings upgrades for Erlanger, according to analysts, include “sustained improvement in financial performance over current results with demonstrated traction against fiscal 2018 budget and fiscal 2019 projections.”
Erlanger President and CEO, Kevin M. Spiegel FACHE, said the positive outlook reported by Moody’s Investors Services, “Serves as further confirmation we have been able to continue to build a financially stable organization while reinvesting in our community and those we serve.
“Our strong financial results over the past four years have enabled Erlanger to invest tens of millions of dollars in fulfilling the need for long overdue, capital expenditures and a new state-of-the-art clinical informatics system under EPIC. We have every reason to believe that we will continue to be able to report strong volumes and robust revenue performance in the future."