FOR IMMEDIATE RELEASE
May 21, 2002
FITCH UPGRADES HHC BOND RATING TO BBB+
Rating Affects New Bond Issue and $778 in Outstanding Debt
Tuesday, May 21, 2002 -- Fitch Ratings announced today that it is assigning a bond rating of BBB+ to the New York City Health and Hospitals Corporation (HHC). A new HHC bond issue is expected to sell in July and will be negotiated by UBS PaineWebber, Salomon Smith Barney and Morgan Stanley. Bond proceeds will be used to fund approximately $300 million of HHC's ambitious seven-year $1.1 billion capital improvement plan to modernize New York City's public hospitals.
In addition to its rating on the new bond issue, Fitch is upgrading its rating on approximately $778 million of HHC's outstanding debt from BBB to BBB+. The Fitch rating precedes announcements from Standard & Poor's and Moody's, whose ratings are expected later this week.
According to HHC President Dr. Benjamin K. Chu, "This rating upgrade confirms the effectiveness of HHC's commitment to provide patient-centered health care. The investor community can see that our increased operational efficiency serves a dual purpose - it supports financial stability, while continuing to improve the quality of care we provide." Fitch's announcement noted that the upgrade reflects its revised approach to the assignment of HHC ratings, which will now correlate directly with New York City's general obligation rating. In past years Fitch has affirmed strong ratings for HHC bonds, based on HHC's improving financial performance and growing cash reserves. The current upgrade acknowledges the City's reliance on the public benefit corporation to provide vital health care services for approximately 1.3 million New Yorkers, including 545,000 uninsured patients. Fitch's rating incorporates the expectation that the City will provide financial assistance, should HHC find itself unable to adequately service bondholders and fulfill its mission as a safety net hospital.
The City's contribution to HHC includes significant support for HHC's capital budget, for recent and future construction projects at Kings County Hospital, Queens Hospital Center and Bellevue Hospital Center. Starting in Fiscal Year 2002, the City also began to reimburse HHC for some of its debt service cost, while HHC agreed to reimburse the City for medical malpractice costs, producing a net benefit to HHC of approximately $30 million in Fiscal Year 2002. Finally, the City continues to provide direct and indirect operating subsidies to support a number of HHC programs.
HHC has impressed the investor community in recent years by strengthening its fiscal health and reversing many years of negative financial trends. Current strategies for improving HHC revenues include the expansion of a successful program to increase enrollment of uninsured patients in Child Health Plus, Family Health Plus and Medicaid. Recent pilot programs have also been successful in redesigning the way in which some HHC facilities provide outpatient care, and the Corporation is poised to use the same techniques to improve care and increase efficiency throughout its facilities. In recent years, HHC hospitals have been repeatedly recognized for providing outstanding patient care, by receiving accreditation scores averaging 94 from the Joint Commission of Healthcare Organizations, exceeding the national average of 91.
Serving the five boroughs of New York City, HHC is the largest municipal health system in the U.S., with an annual budget of $4.1 billion. The public benefit corporation operates 11 acute care teaching hospitals, five long term care facilities, six diagnostic and treatment centers, a certified home health agency, and more than 100 community health clinics.