Fitch Ratings Upgrades Prime Healthcare Foundation Credit Rating
Second consecutive upgrade earned by operational performance, liquidity and commitment
(April 15, 2024 – Ontario, California) – Fitch Ratings has upgraded Prime Healthcare Foundation’s (PHF) Issuer Rating and the Revenue Bond Credit rating to BBB+ and Outlook as Stable for its 14 not-for-profit hospitals in six states. The credit rating upgrade by Fitch is the second credit rating upgrade given by the rating agency to PHF in the last three years.
Fitch attributed the upgrade to BBB+ rating and the Stable Outlook to PHF’s material improvement in operating results in FY23 further strengthened by PHF’s very good liquidity and moderate leverage. Fitch noted that the FY23 results were a result of a combination of stronger volumes reflected in increased discharges, ED visits and outpatient surgeries that drove a 13.1%
increase in operating revenues coupled with a smaller than anticipated 6.7% rise in operating expenses. Helping to control expenses was a 44% decrease in contract labor expenses that was driven by PHF’s implementation of a labor taskforce in early 2022 that focused on recruitment, retention, productivity, nursing preceptorships, virtual education and more efficient onboarding.
“This rating action is a result of a thorough evaluation of Prime Healthcare Foundation’s operations, financial position, and local market conditions. The conclusion from Fitch Ratings is based on our performance despite national challenges such as labor costs and inflationary pressures,” said Steve Aleman, Prime Healthcare’s Chief Financial Officer. “The stable outlook
reflects Prime Healthcare Foundation’s financial growth and stability that positions the Foundation to continue thriving while never losing focus on the mission of providing quality care to the communities it serves.”
“This second consecutive rating upgrade reflects confidence in the Foundation’s operational performance, financial stability and ongoing success as we honor our mission,” said Kavitha Bhatia, MD, president and chair of Prime Healthcare Foundation. “We are grateful to the dedicated teams across the nation that make our commitment to communities possible every day
as we provide clinically excellent, compassionate care and expand access for all.”
Prime Healthcare and Prime Healthcare Foundation comprise 44 hospitals and more than 300 outpatient locations in 14 states, serving over 2.6 million patients annually. Prime is one of the nation’s leading health systems recognized for its quality, patient safety and performance. This year, Prime’s hospitals received more than 200 clinical quality awards from Healthgrades, and Prime has more Patient Safety Excellence Award recipients from Healthgrades than any other health system for eight consecutive years. Its hospitals have also been recognized among the “100 Top Hospitals” in the nation 68 times by Fortune/Merative (formerly IBM Watson Health). In addition, Prime has been recognized by The Joint Commission and National Quality Forum with the prestigious John M. Eisenberg Patient Safety and Quality Award. Prime’s mission is to
3480 E. Guasti Road, Ontario, CA 91761 | www.primehealthcare.com 909-235-4400 provide compassionate, quality care for all and ensure access for which it has been recognized by the Lown Institute for health equity, value and clinical excellence.
Prime Healthcare Services, Inc. successfully completes real estate purchase of hospitals and medical office buildings from Medical Properties Trust
Prime now owns all operations and the real estate for the majority of its hospitals, decreasing debt and improving financial stability
(Ontario, Calif. – April 15, 2024) Prime Healthcare Services, Inc. has completed the purchase of real estate of four facilities that comprise Saint Clare’s Health and St. Francis Medical Center from Medical Properties Trust (MPT) for $350 million. The acquisition was funded with $250 million of cash on hand and a $100 million Promissory Note that is carried by MPT. The
transaction results in a $215 million reduction in Prime’s debt obligations to MPT related to these assets.
Prime Healthcare is the largest physician-founded and led health system in the nation, recognized for award-winning care and forwarding health equity by transforming hospitals into valued community assets. Prime has invested over $2 billion in capital expenditure to improve and strengthen these hospitals and advance their ability to provide clinically excellent care.
MPT previously owned the real estate of Saint Clare’s and St. Francis since Prime’s acquisition of the respective facility operations in 2015 and 2020.
“Prime’s continued acquisition of the hospital real estate assets is a testament to the significant value that Prime’s unique operating model has generated throughout its national portfolio and indicative of the continued investment Prime has made into the markets it so proudly serves,” said Steve Aleman, Prime’s Chief Financial Officer. “Over the last four years, Prime has re-invested over $872 million back into the company through these acquisitions, and as a result, has further solidified its quality-focused mission while unencumbering the facilities from debt.”
Prime’s purchase of the real estate is noteworthy because the hospital real estate was under fixed lease agreement with MPT that included a lease maturity date of August 2035 and effective lease rates that at end of lease that would have approximated 14.25% and 11.25% for the respective properties. However, due to market conditions, Prime was able to negotiate an early buy-out of the assets for $350 million resulting in a nominal increase over the initial lease base of the assets resulting in material annual cash flow savings.
Additionally, as part of the negotiated transaction with MPT, Prime successfully negotiated purchase options for the remaining real estate still under lease with MPT related to the operations at Lake Huron Medical Center (MI), Saint Michael’s Medical Center (NJ), St. Mary’s Medical Center (MO) and St. Joseph Medical Center (MO). The real estate purchase options for the four remaining facilities can be exercised by Prime at any time per its discretion with no prepayment penalty.
This transaction is a continuation of Prime’s initiative over the last several years to acquire the real estate for all its operations and reduce the level of debt associated with the facilities. Prime Healthcare Services now either owns and/or has a defined purchase option for all the real estate assets related to its 30 hospital locations. Prime Healthcare Foundation owns and operates another 14 not-for-profit facilities in six states.
Together, the health system stands apart from other health systems by its unique ability to transform financially struggling hospitals while delivering award-winning, value-based care for more than 600 communities across the nation. Prime has earned national recognition with hospitals among the nation’s best as 100 Top Hospitals 68 times, more than 200 Healthgrades
clinical quality awards and recognition for health equity, social responsibility and clinical excellence from the Lown Institute.
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About Prime Healthcare:
Prime Healthcare is an award-winning health system operating 44 hospitals and more than 300 outpatient locations in 14 states, providing over 2.6 million patient visits annually. It is one of the nation’s leading health systems with nearly 45,000 employees and physicians dedicated to providing the highest quality healthcare. Fourteen of the Prime Healthcare hospitals are members of the Prime Healthcare Foundation, a not-for-profit public charity. Based in Ontario, California, Prime Healthcare is nationally recognized for award-winning quality care and has been named a Top 10 and Top 15 Health System by IBM Watson Health. To learn more, please visit www.primehealthcare.com.
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