Fitch Ratings confirmed its “BBB-” rating for the ProMedica healthcare system with a stable outlook, citing the “diverse healthcare system business model with exposure to three distinct and historically successful divisions” – namely, acute care, care for the elderly and insurance, in particular a rating comment posted on June 3.
“The stable outlook reflects ProMedica’s successful navigation through the coronavirus pandemic without material financial erosion, and the expectation that the organization is well placed to improve its operations and long-term financial metrics with its unique and diverse business model.” , the rating agency mentioned.
ProMedica, a nonprofit healthcare system based in Toledo, Ohio, took over the operations of nursing home chain HCR ManorCare in 2018 under a deal with the real estate investment trust ( REIT) Welltower (NYSE: WELL). He eventually abandoned the ManorCare brand and rebranded the post-acute segment ProMedica Senior Care.
Although ProMedica has a “combination of mid-range revenue defense, mid-range operating risk, and low financial profile ratings” that could indicate a lower rating, Fitch pointed out that the healthcare system has growth potential, in particular if he decides to take advantage of ProMedica Senior Care. assets.
“Fitch notes that ProMedica could significantly improve its financial position given the ability to monetize the assets of the acquisition of HCR ManorCare, or potentially sell parts, or all, of the operations of HCR ManorCare, under stressful circumstances. important, ”the agency said. wrote. “This flexibility is somewhat unique to ProMedica. Under the lease, ProMedica can sell up to 49% of its 20% of the assets held.
ProMedica also has the potential to sell some or all of ManorCare’s old operations at a multiple of earnings before interest, taxes, depreciation and amortization (EBITDA), although Fitch noted that this would be extreme, given that ProMedica Senior Care is accretive to the larger organization.
The ProMedica Senior Care branch also extends the geographic reach of the healthcare system; In acute care, the company’s primary service area is Toledo, Ohio, but ProMedica Senior Care is expanding its geographic footprint in 28 states across the country.
In recent years, the company’s insurance entity has experienced some difficulty, with Ohio notifying ProMedica that it had not been selected as the managed care plan provider in the state as of 2022. However, Fitch stressed that the organization is always able to improve operations. long-term.
“In fiscal 2021, ProMedica plans to divest 25 unprofitable SNFs and has entered into a new joint venture with Welltower to acquire and manage nine better performing SNFs,” the rating agency said. In addition, ProMedica management continues to focus on operational efficiency and the integration of HCR ManorCare into the larger organization, which Fitch says will result in strong long-term operating margins in a more stable environment.