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Rating Agency Upgrades D-H

Lebanon — Dartmouth-Hitchcock’s financial standing has improved in the eyes of one rating agency even though the Lebanon health care provider got off to a rough start to the fiscal year.

Net revenue was 4.3 percent under budget through the first quarter, which ended in September, according to an internal report released last month. Part of that shortfall is due to lower-than-expected patient volumes and also fewer surgeries in the main operating room.

Still, Standard & Poor’s Rating Services has given Dartmouth-Hitchcock an “A+” rating and upgraded its outlook from “negative” to “stable,” Dartmouth-Hitchcock announced Monday. A credit rating is an evaluation of an institution’s credit worthiness and can affect its ability to borrow money.

The S&P ratings report is proprietary and not available to the public. But Dartmouth-Hitchcock spokesman Rick Adams said S&P was aware of the first quarter numbers and was satisfied enough to give the upgrade anyway.

“Being aware of that, they were still confident enough in us to affirm our A+ rating and upgrade our outlook from negative to stable,” Adams said.

The S&P rating comes at a challenging time for the health care industry as federal health reform efforts struggle to get off the ground and reimbursements through Medicare and Medicaid continue to get cut. The difficult environment has led another rating agency, Moody’s Investors Service, to issue a “negative” credit outlook for nonprofit hospitals in 2014.

In issuing that negative rating last week, Moody’s cited fast growing expenses for hospitals, falling federal reimbursements for care and uncertainty around the 2010 Affordable Care Act, particularly as it relates to Medicaid expansion and the technical problems surrounding the online health insurance exchanges.

Despite the upgrade from S&P, Dartmouth-Hitchcock is not immune from those pressures and has failed to reach key financial goals for the first quarter of fiscal year 2014, which began in July.

The organization’s operating margin came in $4.5 million under what it had budgeted, according to a financial update given to employees last month. Total patient discharges were 2.3 percent below budget and surgical cases in the main operating room were 5.9 percent below projections. The lower-than-expected patient numbers were partly due to a delay in opening new inpatient beds at Dartmouth-Hitchcock Medical Center and compounded by a power outage in September that forced it to divert patients to other hospitals.

Dartmouth-Hitchcock has assembled an “action team” to figure out how the organization can meet its financial goals for the rest of the year. One area that is expected to be trimmed is the budget for “travelers,” or temporary clinicians who are hired to fill staffing gaps. Dartmouth-Hitchcock leaders hope to cut the number of travelers from 90 currently to 70 by Feb. 1.

The financial report concluded by asking employees “to focus on enhancing access where there is demand and reducing expense where there is opportunity to do so.”

Adams said Dartmouth-Hitchcock had made no firm decisions to cut staff or services, but is “always looking for ways to improve operations.”

Meanwhile, hospital leaders hailed the S&P upgrade as a good sign for the financial health of the institution and a reflection of the progress that has been made since it went through layoffs and employee buyouts two years ago.

“The rating from S&P is great news for the organization and a testament to the work we are all doing as a team to ensure that D-H is here to improve the lives of the people and communities we serve, for generations to come,” said Dartmouth-Hitchcock CEO Jim Weinstein in a news release. “The upgrade of our outlook from ‘negative’ to ‘stable’ is particularly significant, as it reaffirms the steps we have been taking to turn our financial performance around. S&P notes that ‘improved financial performance’ was critical to the upgrade in our outlook from two years ago.”

Chris Fleisher can be reached at 603-272-3229 or cfleisher@vnews.com.