SOURCE: Catholic Healthcare West

December 05, 2006 20:10 ET

Three Bond Rating Agencies Endorse Catholic Healthcare West's Performance, Strategy

Not-for-Profit Hospital System Achieves A Ratings

SAN FRANCISCO, CA -- (MARKET WIRE) -- December 5, 2006 -- Catholic Healthcare West (CHW) announced today that three major bond rating agencies have upgraded CHW's bonds, the third round of upgrades for the organization in the past three years. The latest endorsements began in late October 2006 when Standard & Poor's upgraded CHW's bonds to A from A- with a stable outlook. Moody's Investor Services followed, upgrading CHW's rating to A2 from A3 with a stable outlook. Today, Fitch Ratings also upgraded CHW to A+ from A- with a stable outlook.

In today's announcement, Fitch cited CHW's strong performance and management practices: "The rating upgrade to 'A+' from 'A-' reflects the system's excellent management practices, which are evidenced by CHW's sustained improvement in operating profitability and increased liquidity relative to expenses. Management has increased accountability at individual hospitals, executed on operating budgets, made successful strategic investments and been among the leaders in using information technology to drive improved operating efficiencies."

In its upgrade decision Standard & Poor's cited CHW's "strength as one of the nation's largest hospital systems, with a track record over the past six years of continued operating improvement and strong cash flow." Moody's also noted "CHW's multiple-year trend of improved operations, fifth year of double-digit same-facility revenue growth, good increases in adjusted admissions, and strong unrestricted cash levels."

"These upgrades to A ratings by all three major bond rating agencies are a remarkable statement of confidence in Catholic Healthcare West," said Lloyd H. Dean, president/chief executive officer. "They are a validation of the strength of CHW's enduring mission and eloquent testimony to the hard work and dedication of more than 50,000 employees, physicians and volunteers who provide quality, compassionate care to the communities we serve."

In October, CHW announced fiscal year (FY) 2006 results, which showed a net income of $438 million. Across the system, CHW's operating income rose more than one-half billion dollars over the past six years: from a loss of $307 million in FY 2000 to a gain of $263 million in FY06.

CHW also reported that it had provided more than $465 million in community benefits and free care for the poor during FY06, an increase of $124 million from the prior year. This included charity care, community grants, and free primary care provided at community health care clinics operated by CHW.

Despite CHW's financial success to date, CHW, like all health care providers, faces many economic and operational challenges in the months and years ahead. CHW hospitals operate in a U.S. health care system that is increasingly fragmented and challenged as evidenced by increasing demands for services, inadequate reimbursement rates for private hospitals, and increasing numbers of uninsured and underinsured patients. Across the U.S., 46.6 million people were without health care insurance in 2005.

"We know we have more work to do and many challenges ahead," said Michael Blaszyk, executive vice president/chief financial officer for CHW. "We'll follow the management philosophy that has served us well thus far in meeting those challenges. We'll continue to build our operational strength as we reinvest in our communities. We'll continue as a beneficial presence and a proactive agent for change in the communities we serve."

"Beyond any success there are challenges," Dean said. "However, CHW has built our strength through operational excellence and by investing in our talented people. As we go forward, our mission and values will continue to guide us along with the innovation, expertise and devotion of the many wonderful employees within the Catholic Healthcare West family."

CHW discloses audited annual financial statements and quarterly results to bondholders during quarterly investor calls, and subsequently to the public through its website at www.chwhealth.org/financial_info. Quarterly financials are reviewed by auditors prior to release. In its report, Fitch Ratings has called CHW's disclosure policy "one of the best in Fitch's portfolio."

As a not-for-profit hospital system, CHW's margins will be reinvested in hospital improvements, employee benefits, community health programs and technology enhancements.

About Catholic Healthcare West

Catholic Healthcare West (CHW), headquartered in San Francisco, CA, is a system of 42 hospitals and medical centers in California, Arizona and Nevada. Founded in 1986, it is the eighth largest hospital system in the nation and the largest not-for-profit provider in California. CHW is committed to delivering compassionate, high-quality, affordable health care services with special attention to the poor and underserved. The CHW network of more than 8,000 physicians and approximately 45,000 employees provides health care services to more than four million people annually. In 2006, CHW provided $465 million in charity care and unsponsored community benefit. For more information, please visit our website at www.chwHEALTH.org.

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