The University of Vermont Health Network’s bond ratings have been upgraded by two of the nation’s leading bond agencies, an affirmation of the health network’s financial stability. S&P Global Ratings again upgraded the network’s bond rating, this time to ‘A’ status. Moody’s Investor’s Service also boosted the network’s rating to ‘A2,’ which is the equivalent of the S&P high mark.
In announcing the upgrades, both firms pointed to the health network’s steady fiscal management as key to their decisions. The UVM Health Network, comprising six hospitals and one home health care affiliate in Vermont and Northern New York, also holds an ‘A-’ rating from a third major agency, Fitch Ratings.
S&P pointed to the UVM Health Network’s “standing as a low-cost provider in Vermont” and highlighted the network’s leadership in the transition from the current “fee for service” model to a system that rewards quality of care, stating that they consider the network to be “advanced on the transformation relative to many organizations.” Analysts said the shift has been aided by improving coordination of care and increasing access to primary care, as well as efforts to implement a unified electronic health record to improve the patient experience and quality of care.
Moody’s also noted that by having a network of hospitals and other providers already in place, the UVM Health Network has an advantage as it adapts to the changes in how providers are reimbursed for providing care.
Both agencies acknowledged the potential financial risk the network is undertaking in implementing an electronic health record and the additional risks hospitals are taking as part of the move to “value-based care,” where they are paid a lump sum to manage care for patients in a more coordinated way as opposed to being paid for each test or service. Analysts with both rating agencies concluded that network leadership had adequately planned to mitigate those risks.
“I’m pleased with the rating agencies’ endorsements of our approach to financial planning and their confidence that we will be able to deliver on our commitment to improve quality, access to care and cost control,” said John Brumsted, M.D., president and CEO of the UVM Health Network and CEO of the UVM Medical Center. “Our financial stability enables the transformative work we’re doing across the network to transition to a system of care that will foster stronger and healthier communities.”
This is not the first time rating agencies have cited health care reform efforts as an important indicator of, and component to, achieving greater financial stability in Vermont. Last summer, Agency of Human Services Secretary Al Gobeille joined Governor Phil Scott, State Treasurer Beth Pearce and other leaders for meetings on Wall Street with S&P, Moody’s and Fitch to discuss the state’s rating outlook. At their request, Gobeille presented details of Vermont’s transition to value-based care to all three rating agencies and was encouraged by their interest and focus on health care reform.
“The rating agencies are keenly aware of our health care reform plans in Vermont and view our efforts as necessary if we are going to slow the growth of and ultimately reduce health care costs, and in turn strengthen our state’s economy,” Gobeille said. “Health care spending accounts for nearly 20 percent of our GDP, so achieving greater stability and predictability is essential. We’re very appreciative of the leadership of so many Vermont health organizations, including the UVM Health Network, as we work to transform health care.”
Lower Borrowing Costs
One benefit of the improved ratings for UVM Health Network affiliates and their patients will be lower costs for short-term and long-term borrowing. This prospect was especially important for the UVM Health Network-Porter Medical Center in Middlebury when it joined the network in April of 2017.
“As we explored affiliation last year, our focus was ensuring we could improve patient care by joining a network that has the strength and leadership required to serve and improve the health of our patients,” said Fred Kniffin, M.D., president and CEO of the network’s Porter affiliate. “An important element of that strength is the stable financial management that is reflected in these improved ratings. Today’s news means it will cost us less to complete major projects to serve patients better, such as the medical building we hope to construct. Those savings are really important to our community.”
Borrowing costs will also be lower for other projects designed to improve access, quality and efficiency of care in the network, including a joint effort by the network’s Champlain Valley Physicians Hospital and Hudson Headwaters Health Network in Northern New York to expand primary care services in Plattsburgh, and an initiative with the network’s Elizabethtown Community Hospital to improve access to emergency and outpatient services in Ticonderoga.
Over the last several years, strong credit ratings have lowered borrowing costs by $63 million across the health network through debt consolidation and refinancing. This and other efforts, such as achieving more than $50 million in network supply chain savings, have contributed to the UVM Medical Center’s ability to significantly reduce commercial rate requests.
Fitch’s ‘A-’rating with a stable outlook will not change until it completes an annual review in the fall.
About The University of Vermont Health Network
The University of Vermont Health Network is an integrated system serving the residents of Vermont and northern New York with a shared mission: working together, we improve people’s lives. The partners are:
Our 4,000 health care professionals are driven to provide high-quality, cost-efficient care as close to home as possible. Strengthened by our academic connection to the University of Vermont, each of our affiliates remains committed to its local community by providing compassionate, personal care shaped by the latest medical advances and delivered by highly skilled experts.