S&P raises rating while Fitch downgrades University of Maryland Medical System bonds

Two debt ratings agencies offered different takes this week on bonds issued for the University of Maryland Medical System as it’s poised to break ground Thursday on a new hospital in Prince George’s County.

S&P Global Ratings announced that it has raised its ratings on the Maryland Health & Higher Education Facilities Authority's health care revenue bonds issued for the state medical system to A from A- with a “stable” outlook for the future.

Fitch Ratings, however, downgraded UMMS bonds to A- from A as the authority is about to issue nearly $175 million in new bonds for UMMS to pay for its share of the new hospital and other projects.

Fitch took a dim view of the risks of the medical system’s recent acquisition of troubled Dimensions Health, the hospital system for Prince George’s County, with a ratings watch of “negative.”

Borrowing costs typically track with debt ratings. Higher bond ratings usually translate to lower interest rates and vice versa. While the differences in interest rates may appear marginal, the costs or savings can add up on a project as large as a new hospital.

The new University of Maryland Capital Region Health plans to spend more than $600 million to build a new hospital in Largo to replace the aging Prince George’s Hospital Center in Cheverly as well as an adjacent ambulatory care facility and a new medical facility to replace Laurel Hospital.

In a statement, Stephen Infranco, an S&P credit analyst, said the upgrade “reflects UMMS' strong enterprise profile with a sound business position as one of Maryland's leading health system, further strengthened through the recent acquisition of Dimensions Health Corp.”

The acquisition boosted its market share by 3.2 percent to 27.3 percent, he said.

While acknowledging Dimensions’ volatile operating results, S&P noted that UMMS has a strategy to improve operations in the near term while integrating it into the medical system and transforming health care in Prince George’s County.

Fitch, however, noted the potential risks in that integration and transformation, as well as the increased debt burden on the medical system, in explaining its downgrade.

UMMS currently has long-term debt of $1.75 billion. The system is issuing about $131 million in tax-exempt bonds and $44 million in taxable bonds bonds this year to help pay for its portion of the construction costs for the new hospital and other facilities.

The state of Maryland and Prince George's County committed $208 million each towards the total cost of the projects, as well as $195 million of operating support during the first few years.

Baltimore Sun reporter Andrea K. McDaniels contributed to this article.



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