A national credit rating agency has upgraded Summa Health’s credit worthiness.
Last November, Moody’s Investors Services had lowered the Akron-based health system’s outlook from stable to negative on $350 million worth of debt from Baa1 to Baa2.
The bond rating carried a "moderate risk" for investors, and in its report at the time, Moody’s blamed a decline in patients seeking care at Summa as contributing to operating losses in 2017.
On Monday, Moody’s upgraded the outlook back to stable.
In affirming the bond rating and revising the outlook, Moody’s cited Summa’s significant operating improvement achieved in 2018, strong liquidity and cash reserves, leading market position and ongoing growth strategies.
In a memo to employees, Summa President and CEO Dr. Cliff Deveny said the upgrade “underscores the thoughtful manner in which we operate as a company and the steps that we have taken to improve our performance across the organization. There still remains a great deal of work to do, but the affirmation of our bond rating and revised outlook highlight our strengths and ongoing commitment to ensure our community continues to receive exceptional healthcare now and into the future.”
In its report, Moody’s said the revision “reflects our expectation that the significant operating improvement achieved in 2018 will be largely sustainable, volumes will continue to return as the System refocuses on growth strategies and opens a new patient tower, and liquidity will remain strong even after project completion. Expected cuts in government reimbursement and new operating costs for the patient tower will challenge margins in 2019, but we expect cost reduction and other performance improvement initiatives will result in performance close to 2018. The rating also incorporates Summa's leading market position, heavy competition and revenue constraints from unfavorable demographics.”
Moody’s said the recent move by Summa to look for potential new financial partners or implications related to potential partnership are not considered in the rating.
Summa is still recovering from a rough 2017. The health system went into a financial free-fall after an abrupt switch of its longtime emergency medicine physician group on New Year's Day 2017. Then-CEO Dr. Thomas Malone resigned weeks after hundreds of doctors voted no confidence in his leadership. A national accrediting agency ultimately revoked the hospital's ability to train resident emergency department doctors because of numerous deficiencies following the staffing switch.
Summa has been turning its financial numbers around. At a recent Akron Roundtable speech, Deveny said through the end of September, Summa's operating margin was $18.5 million, a turnaround of more than $55 million compared to the same period a year ago. Summa was expecting to finish the year with operating income of $22 million versus a budgeted $12 million.
But there are still challenges. The emergency medicine residency program last month was denied its application to restart.
Deveny has said that getting Summa’s bond rating back up was among his priorities.
Beacon Journal consumer columnist and medical reporter Betty Lin-Fisher can be reached at 330-996-3724 or firstname.lastname@example.org. Follow her @blinfisherABJ on Twitter or www.facebook.com/BettyLinFisherABJ and see all her stories at www.ohio.com/betty