Moody’s upgrades North Broward Hospital District, Florida, to Baa1

Moody’s Investors Service raised North Broward Hospital District, Florida’s revenue bonds to Baa1 from Baa2 and revised its outlook to stable from positive.

North Broward Hospital District has about $300 million of debt outstanding.

The upgrade to “reflects the durability of margins and liquidity, which will be supported by higher property tax receipts under the authorized levy and NBHD’s efforts to grow and diversify revenue by expanding retail pharmacy and other business lines,” Moody’s said.

NBHD serves the northern part of Broward County. It’s a public safety-net hospital system with four hospitals, including a children’s hospital within the Broward Health Medical Center. It also operates outpatient facilities and clinics.

In fiscal 2022, it reported roughly $1.5 billion of revenue, including tax revenues.

“The stable outlook reflects the likelihood that operating cash flow margins will remain in the mid-single digit level and that balance sheet measures will remain solid as NBHD deploys capital to grow and re-invest in its assets,” Moody’s said.

Moody’s noted the hospital board’s commitment to incorporate operating and capital needs when setting the mill rate will support stable tax receipts even if the mill rate is rolled back as the assessed value of county property increases.

“NBHD’s essentiality as the county’s safety-net provider and its tertiary service array will continue to drive good patient demand and volumes, further undergirding its essentiality,” Moody’s said.

However, Moody’s said challenges include the hospital’s reliance on the tax levy and other supplemental funding programs.

“Also, the market will remain highly competitive, particularly in light of its attractive demographic profile and population growth,” Moody’s said.

In 2022, S&P Global Ratings raised the long-term rating on the district’s Series 2017B revenue bonds to A-minus from BBB-plus and assigned a stable outlook to the bonds.

“The higher rating reflects our view of Broward Health’s improved risk management practices that we capture under our environmental, social and governance factors, including progress addressing key organizational challenges, leading to improved internal controls, compliance, and accountability, and reducing a risk that contributed to prior downgrades,” S&P credit analyst Stephen Infranco said at the time.

“The stable outlook reflects our expectation that Broward Health will sustain the organizational improvements enacted under [a corporate integrity agreement] as they remain an essential health care provider in Broward County,” S&P said.

“Operating performance, while still challenged, is manageable and offset by Broward Health’s solid balance sheet for the rating level coupled with unused tax millage capacity, providing ample flexibility as management addresses the ongoing challenges of the pandemic and inflationary pressure, while continuing to focus on key performance improvement measures.”