Fitch Ratings Insurance Group, a global rating agency, awarded A+ ratings to Dartmouth-Hitchcock Obligated Group's 2010 revenue bonds, a rating consistent with Fitch's last review of DHOG in August 2009. The rating was based on several factors including the bonds' continued profitability and the stability that comes from DHOG's affiliation with the College, according to a Fitch press release on Friday.
DHOG consists of the Dartmouth-Hitchcock Medical Center, as well as two hospitals in Vermont and Massachusetts, and is currently "the largest and most integrated provider of health services in its region," according to the press release.
The revenue bonds, which total $75 million, will be issued as fixed-rate bonds through the New Hampshire Health and Education Facilities Authority.
Fitch also affirmed its A+ rating on $461 million of outstanding debt that DHOG has issued through the New Hampshire Health & Education Facilities Authority, the Vermont Educational and Health Buildings Financing Agency and the Massachusetts Health and Educational Facilities Authority. DHOG issues bonds through external agencies because it does not possess its own investment company, The Dartmouth previously reported.
"DHOG's dominant market footprint and management's strategic focus have contributed to a strong and unusually stable financial profile that is consistent with Fitch's A' category medians," the release stated.
Representatives from Fitch and DHMC were not available for comment by press time.
Fitch's credit ratings are based on an alphabetic scale from AAA to D. Ratings from AA through D can be modified with a plus or minus, according to Fitch's website.
Fitch also designated DHOG's rating outlook as "stable." The rating outlook indicates the probable rating trend over the next several years, and DHOG's lack of "significant debt plans" makes the bonds more secure, according to the release.
"The Stable Outlook reflects Fitch's expectation that DHOG's market presence and well-aligned and broad operating platform will continue to translate into solid profitability that is consistent with historic levels," the release said.
DHOG will use the $50 million from bond proceeds to construct an ambulatory services building in Nashua, N.H., which will consolidate three current ambulatory care sites, the press release said. The remaining bond proceeds will fund various capital expenditures.
DHOG earned its A+ rating because it is "a leading provider of advanced high acuity services" and it integrates a clinical and research platform, according to the release. DHOG has shown "solid historical profitability" and is currently a leading health service provider to an expansive geographic area that includes New Hampshire, Vermont and parts of Massachusetts, according to Fitch.
"With this and other related organizations, DHOG represents the chief clinical elements of a broadly integrated delivery, research and academic system," the statement said.
The release praised the management of DHOG for its actions to secure the group's assets during the recent market downturn.
Other "key rating drivers" cited in the press release included reduced national and state government reimbursement, the expansion of DHOG's operating platform and a focus on improving the health of the communities under its jurisdiction.
The release also emphasized DHOG's relationship with nearby organizations that will allow it to play a leading role in upcoming national health care reform.
"Related organizations not part of DHOG, such as Dartmouth College and its medical school, as well as a Veterans Administration hospital, provide academic and research capabilities to the overall system, which is well positioned to respond to and influence the sector's anticipated restructuring over the next several years," the release said.
DHOG's profitability has increased over the past three years, the release noted. DHOG reported annual revenues of $1.4 billion in fiscal year 2009, up from $1.3 billion in fiscal year 2008.
One concern expressed by Fitch in the release was related to DHOG's "light liquidity" relative to peer institutions. DHOG currently has $506 million in unrestricted cash and investments compared with the $521 million it had in 2007. The available cash flow represents 135 days of expenses, 26 percent below the median rate for institutions in the Fitch "A" category, according to the release.
The release noted several organizational changes taking place in the institutions that make up DHOG, which should be finalized this summer. In May 2009, Dartmouth-Hitchcock Clinic and Mary Hitchcock Memorial Hospital established Dartmouth-Hitchcock Health, a collaborative health-care system in New Hampshire and Vermont.
"DHH will serve as a platform for the creation of a larger integrated health system in the region, which should accrue additional benefits to the DHOG going forward," the report said.
Dartmouth-Hitchcock Clinic and the Catholic Medical Center in Manchester also signed an affiliation agreement in July 2009. Integration between the two organizations is "ongoing," according to the release.
DHOG issues bonds independently from the College and professional schools, The Dartmouth previously reported.
