Wed 09/07/2022 15:45 PM
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Relevant Documents:
Financials (EMMA)
Fitch Report (June)
Moody’s Report (October 2021)
Issuer Page
Official Statement (Series A, B, C, D and E; Series N and O)
Issue Details (Series A, B, C, D, E, N, O)

Yale New Haven Health System, or YNHHS, posted a $171.2 million operating loss through the fiscal 2022 third quarter ended June 30, compared with a $25.5 million in income from operations through the same nine-month period a year earlier, according to unaudited financial statements posted to EMMA.

A non-operating loss of $193 million, mostly tied to losses from investments, coupled with the operating loss, drove a $403 million decline in net assets to $4 billion from $4.4 billion over the nine months ended June 30. Cash subsequently dropped to $157 million from $406 million over the same period. The system reported total assets of nearly $8.435 billion as of June 30 versus $4.356 billion in total liabilities.

YNHHS reported total operating revenue of $4.645 billion through June 30, up from $4.38 billion during the nine-month period a year earlier. Operating expenses totaled $4.817 billion through June 30, compared with nearly $4.355 billion during the first nine months a year earlier.

Headquartered in New Haven, YNHHS is a fully integrated regional healthcare delivery system consisting of several operating entities and affiliates including Yale New Haven Hospital, the two-campus Bridgeport Hospital, Lawrence & Memorial Hospital, Greenwich Hospital Westerly Hospital, a 120-bed skilled nursing facility, and Northeast Medical Group, a physician foundation with more than 1,000 providers.

YNHHS reported nearly $1.636 billion in long-term debt outstanding as of June 30, consisting of $587.65 million in tax-exempt bonds, $22.73 million in taxable bonds and loans payable of $1.025 billion. The bulk of the bond debt pertains to revenue bonds issued through the Connecticut Health and Educational Facilities Authority. A summary of YNHHS’ long-term debt as of Sept. 30, 2021, is provided below:

The system’s bonds are secured by a pledge of gross revenue of the YNHHS obligated group, which accounted for essentially 100% of the system’s assets and revenue in fiscal 2021, which ended Sept. 20, 2021. The members of the obligated group have adopted certain governance provisions in their certificates of incorporation and bylaws pursuant to which YNHHSC retains the authority to directly take certain actions on behalf of each obligated group member without the approval of the board of trustees of the applicable obligated group member, including the incurrence of indebtedness on behalf of each obligated group member, the management and control of the liquid assets of each, and the appointment of the president and CEO of each obligated group member.

In late June, Fitch Ratings affirmed its AA- issuer default rating, or IDR, for the YNHHS obligated group and debt rating on bonds issued by the Connecticut Health and Educational Facilities Authority on behalf of YNHHS hospitals. In addition, Fitch affirmed the F1+ short-term rating supported by self-liquidity on certain YNHHS and Greenwich Hospital bonds. The outlook is stable.

Fitch stated that its ratings are based on the “expectation that YNHHS will return to what had been its historically consistently strong operations” in the outer years of the credit ratings agency’s forward-looking scenario. The rating was further supported by Fitch’s view that the system “has sufficient available liquidity to carry out the large Neurosciences Center project at the Saint Raphael campus of the Yale New Haven Hospital, even in the absence of philanthropy, which potentially could fund a significant portion of the project.” In Fitch’s opinion, the system also has some debt capacity at the AA- rating.

Fitch anticipated that the system operating results for fiscal 2022 will be “materially weaker as a result of volumes still recovering to pre-pandemic levels and inefficiencies related to higher lengths of stay and other expense pressures.” However, Fitch projects that the system “will ultimately return to the strong operating results that it has demonstrated in the past, based on its local and regional market presence and brand recognition for tertiary and quaternary care, as well as management’s recently launched turnaround efforts.”

In October 2021, Moody’s Investors Service affirmed its Aa3 rating on the bonds of the YNHHS Corp., which is the obligated group agent and borrowing entity for YNHHS. At the same time, Moody’s affirmed the corporation’s existing Aa3/VMIG 1 ratings, which are backed by YNHHS’ own liquidity. The rating outlook was revised to negative from stable. Moody’s said the outlook revision reflects its view that the system will face greater challenges in returning to good, pre-pandemic operating cash flow margins due in part to unanticipated growth in labor and supply expenses. “Combined with higher permanent debt levels, debt to cash flow will likely be unfavorable relative to historical levels for a protracted period despite full volume recovery,” Moody’s reported.
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