As the Measure I campaign nears its close, the officials with the Tulare Regional Medical Center received a bit of good news: Fitch Ratings, a key credit rating agency, has placed the hospital on “Rating Watch Positive.”
Positive Signals from Credit Rating Agencies
“Rating Watch Positive” means that the firm may consider increasing the hospital’s default rating from ‘BB-,’ a rating that “indicate[s] an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time,” to a higher rating.
The rating above “BB-” is “BBB,” which indicates that “expectations of default risk [would be] low.”
The potential for improvement was celebrated at the August 24 meeting of the Tulare Local Healthcare District Board of Supervisors.
“Here you have yet another external verification and validation of our positive momentum, and what’s going on,” said Alan Germany, the CFO of Healthcare Conglomerate Associates, the company that the district has contracted to run TRMC.
Other credit rating agencies are also looking favorably on TRMC, Germany said.
“Moody’s as well — we’ve been speaking to them, and Moody’s, just like Fitch, they’ve essentially affirmed our rating,” Germany said, “and Moody’s is waiting to see: waiting to see what’s going to happen with Measure I, and potentially upgrade at that point.”
Alongside the news of ratings improvement was another positive health indication for the hospital: July marks 28 months of “continuous net positive margins,” Dr. Benny Benzeevi, CEO of Healthcare Conglomerate Associates, the company that runs TRMC, said.
A longer press release from Fitch Ratings, however, notes with several catches.
- Measure I: Fitch Ratings notes that the hospital’s rating may be reassessed if the ballot measure fails.
- Long-Term Project Funding: The credit ratings group also stated that they would need an updated plan from management should the ballot measure fail.
- No Fallback Plan Indicated: “Management has not indicated plans if the ballot measure fails,” the press release reads.
The press release issued by the HCCA did not note any of these factors, said Dr. Edward Henry, speaking to the board during the public comment section of the meeting.
“One of the things I’m looking at in here, it says management has not indicated plans if the ballot measure fails — and I’m surprised because all of the literature, propaganda says if we don’t pass this measure, the hospital will fail. Why wasn’t Fitch notified, and would they have given a fairly decent rating in the report had they known this?” Henry said.
“One of the other things I notice up here in the Fitch report — and I would actually like to see this Fitch report actually posted online, if you’re so bold to do so — it says Fitch assigned the district a BB- issuer default rating. There’s seven ratings — that’s the fifth rating, there’s only two lower than that. I’m not seeing this in the press release up here.”
There are eleven total “Issuer Default Ratings” that Fitch Ratings issues, according to their website. Those ratings are AAA, AA, A, BBB, BB, B, CCC, CC, C — for institutions that have not, in Fitch’s opinion, defaulted — and RD, and D, ratings reserved for institutions that have, in Fitch’s opinion, either fully defaulted or defaulted on a specific debt.
Immediately following Henry’s comment, Shawn Burgess, CIO for HCCA, spoke.
“I’ve never been in a community that has been such fought hard against the hospital growing, in spite of everything we’ve made changes to. There just seems to be some minded people who are acrimonious over the hospital. It does not make sense,” Burgess said. “This facility is over 60 years old — this town has grown five times since that time, the ER is the same size as it was 60 years ago. I don’t understand how you can not support the hospital growth, and to the benefit and the betterment of the community’s health. It just doesn’t make sense to me.”
The Grand Plan
“Our community is united in the need for a quality hospital and finishing the new tower,” Doug McNerney said, speaking after Burgess. “We have major disagreement in how to accomplish these things, and the Finance Committee meeting on the 23rd of August is a good example of those very views.”
McNerney noted declines in services provided between 2014 and 2016.
“The July 2016 numbers showed surgeries down 32%, deliveries down 47%, even emergency room visits were down 11.5%, and clinic visits down 2.4%,” McNerney stated. “The mission of the hospital is not to make profit or have good bond ratings — the financial numbers are good means to an end, but the end is to provide quality healthcare to our residents and visitors. In the latter regard, we are failing badly. We should be ashamed that we have misplaced our priorities in favor of the dollar over the healthcare needs of our residents.”
Benzeevi disputes at the idea that HCCA focuses on payments over people when he presented a summarized large-scale plan to turn around the hospital.
“Number one is, you’ve got to stabilize the finances, and I take extreme resentment to the comment made earlier about the fact that we focus on finances alone,” Benzeevi said. “We focus about our goal, which is to create a healthier community, but without stabilizing the finances, there is no community, there is no hospital. That’s critical.”
The plan involves a number of steps, Benzeevi said:
- Stabilizing finances
- Prepare the new building for completion
- Upgrade internal systems
- Complete the new building
- Meaningfully improve service, customer experience
- Create a community-wide board to provide ongoing direction to the hospital
- Build an integrated health system “where the right care is available to all that need it”
Those on both sides of Measure I spoke during the public comment section of the meeting.
Suzanna Aguilera-Marrero spoke first.
“I’ve dropped to the floor on my knees, and I have prayed, lots of times, for my family. And I know what it’s like to need, and we are not a third world country, where we should not be entitled to access to healthcare,” Marrero said. “And until you’re there, you’re not really there.”
McNearney and Henry spoke in opposition to Measure I. So did Tulare resident Michele Moore.
“Some people with the Yes campaign are going door to door, asking people if they have voted, and the person at the home said, ‘I’m not registered to vote,’ and the person there on the Yes side said ‘that’s okay, you don’t have to be registered to vote’ and they have ballots in their hands,’” Moore said.
Hospital staff and Yes on I supporters immediately rebutted the accusations in the crowd, saying “no,” “that’s not true,” and “that’s baloney.” Moore said that her source is reputable and the claims should be further investigated.
Outside of the tit-for-tat of campaigning, according to the Fitch Ratings report, hospital management has stated that “polling is favorable.”
Additionally, Dr. Parmod Kumar, one of the members of the TLHCD Board, was absent from both this meeting and the prior meeting.
While it was not stated why Dr. Kumar was not able to attend the meeting, one Tulare voter who went to the Tulare County Registrar’s office to cast her ballot Thursday stated that Kumar has been out encouraging voters: she says he came to her door and encouraged her to vote on the measure.
Listen to the meeting below, or go to our TLHCD Board Meetings page to listen to past meetings.