The rating agency affirmed the BBB rating on Denver Health and Hospital Authority’s (DHHA) bonds as stable with a stable outlook, citing improved operating results.
The confirmations come after the Public Safety Network Health System raised concerns last month about an influx of migrants from the southern border
Fitch Ratings said on Tuesday that operating margins improved in fiscal 2023, although the system continues to face challenges from “a constrained payer mix, relatively high levels of uncompensated care, and operating expense pressures.”
“Fitch expects operating EBITDA (earnings before interest, taxes, depreciation, and amortization) margins to continue to improve and stabilize in the 6.5% to 7.5% range over the next two years, supported by DHHA’s strong volume and select business expansion. Higher margin services,” the ratings agency said in a report.
S&P Global Ratings also noted in a January 31 report that
“Throughout the 10 months of fiscal 2023, operations improved and were in line with breakeven expectations, driven by higher volumes, improved reimbursement rates, revenue cycle work and a significant reduction in reliance on contract labor following solid recruiting efforts throughout the year,” the report stated.
DHHA said the rating affirmation reflected its efforts to improve profits and strengthen its financial position.
“While we are proud of this rating, Denver Health continues to face financial challenges due to rising costs of uncompensated care,” a statement from DHHA said. “Continued local and state support is needed to address these costs so we can continue Improve our financial health and continue to provide high-quality health care to everyone in Denver, regardless of their ability to pay.”
In January, DHHA CEO Donna Lynne told a Denver City Council committee that a lack of reimbursement for treating 8,000 immigrants during 20,000 visits had pushed the system to the brink of collapse as it negotiated with the city for 2024. This situation was not anticipated when operating the agreement in 2006.
Under the agreement, the city will pay Denver Health $73 million in fiscal 2024 to pay for patient care and services. This amount is up from $69 million in fiscal 2023.
A report to the committee by health system consultant Ernst & Young showed that uncompensated care costs have increased from $59 million in 2020 to $120 million in 2022 and are expected to reach $135 million in 2023.
The ratings agency noted Denver Health’s importance as Colorado’s only public safety net health care provider and the city’s use of voter-approved general obligation bond financing for some DHHA projects.The health system was separated from the City and County of Denver in 1997 and finally
“The rating reflects our view of DHHA’s strong market position as an integrated health care delivery system and an important public provider of health care and community services in the Denver metro area,” S&P said. “As the region’s only Level 1 trauma service As one of the providers and emergency medical transport operators, DHHA has a solid market position in a competitive space.”