Fitch Rankings affirmed its “BBB-” score for ProMedica Well being System with a secure outlook, citing the well being system’s “diversified enterprise mannequin with publicity to a few distinct and traditionally profitable divisions” – specifically, acute care, senior care and insurance coverage, in a ratings commentary published June 3.
“The Secure Outlooks displays ProMedica’s profitable navigation of the coronavirus pandemic with out materials monetary erosion, and the expectation that the group is well-positioned to enhance its operations and monetary metrics over the long run with its distinctive and diversified enterprise mannequin,” the scores company mentioned.
ProMedica, a nonprofit well being system based mostly in Toledo, Ohio, took over the operations of the nursing home chain HCR ManorCare in 2018 in a cope with the actual property funding belief (REIT) Welltower (NYSE: WELL). It will definitely phased out the ManorCare model and renamed the post-acute segment ProMedica Senior Care.
Whereas ProMedica does have a “mixture of midrange income defensibility, midrange working threat, and weak monetary profile assessments” which may point out a decrease score, Fitch identified that the well being system has development potential, particularly if it determined to leverage the ProMedica Senior Care belongings.
“Fitch notes that ProMedica might enhance its monetary place considerably given the power to monetize belongings from the HCR ManorCare acquisition, or to probably unload elements, or the entire, of the HCR ManorCare operations, ought to a big stress scenario come up,” the company wrote. “This flexibility is considerably distinctive to ProMedica. Underneath the phrases of the lease settlement, ProMedica can promote as much as 49% of their 20% of the owned belongings.”
ProMedica additionally has the potential to promote parts of or the entire former ManorCare operations at a a number of of earnings earlier than curiosity, taxes, depreciation and amortization (EBITDA), although Fitch famous this might be excessive, provided that ProMedica Senior Care is accretive to the bigger group.
The ProMedica Senior Care arm additionally expands the well being system’s geographic attain; in acute care, the corporate’s major service space is Toledo, Ohio, however ProMedica Senior Care expands its geographic footprint into 28 states throughout the nation.
Lately, the corporate’s insurance entity has seen some struggles, with Ohio informing ProMedica that it has not been chosen as a managed care plan supplier within the state beginning in 2022. Nevertheless, Fitch identified that the group continues to be positioned to enhance operations in the long term.
“In fiscal 2021, ProMedica plans to divest 25 unprofitable SNFs and has entered into a new joint venture with Welltower to accumulate and handle 9 higher performing SNFs,” the scores company mentioned. “Moreover, ProMedica administration continues to stay centered on working efficiencies and integrating HCR ManorCare into the bigger group, which Fitch believes will translate to robust working margins over the longer-term in a extra secure setting.”