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July 13, 2023

Yale New Haven Health system bond rating downgraded

PHOTO | FILE IMAGE Yale New Haven Hospital.
By Michelle Tuccitto Sullo

Fitch Ratings recently downgraded Yale New Haven Health system’s default and debt rating on bonds issued by the Connecticut Health and Educational Facilities Authority to A+ from AA-, concluding its rating outlook is “stable.”

According to Fitch, which announced the rating change June 28, the one-notch downgrade reflects “the last three years of weakened operating performance, which has continued through the second quarter of the current fiscal year ended March 31, 2023.”

It also cited a decline in the health system’s liquidity position, large capital needs, and slow recovery of volumes to pre-pandemic levels.

In addition to Yale New Haven Hospital, the system also includes Bridgeport Hospital, Greenwich Hospital, Lawrence+Memorial Hospital, and Westerly Hospital in Rhode Island.

Mark D’Antonio, a spokesman for the health system, reached on Wednesday, did not immediately provide a comment on the change. 

According to Fitch, the “stable outlook” is based on its expectation that the health system will “ultimately return to stronger operating results, albeit slightly lower than had been the historical level.”

Fitch indicated it expects the system’s operating results for the 2023 fiscal year will “remain weak,” but financial recovery is expected starting with 2024.

Fitch noted that the health system’s management launched a turnaround effort last year. The system has worked to increase revenue, such as by expanding ambulatory services and increasing labor productivity, and worked to decrease expenses, such as by reducing lengths of stay, according to Fitch. 

“The operating optimization target is to generate operating improvement in order to achieve breakeven operating results by 2024 and positive operating results starting in 2025,” Fitch indicated.

Fitch concluded the health system has sufficient available liquidity to carry out its approximately $840 million, 505,000-square-foot neurosciences tower project at the St. Raphael campus at Yale New Haven Hospital, slated to be completed in 2027.

When considering its rating, Fitch did not factor in the health system’s potential acquisition of three Connecticut hospitals - Waterbury Hospital, Manchester Memorial Hospital and Rockville General Hospital - noting that the deal still faces regulatory hurdles. 

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