Okay, there was some deception in that headline. Parkland Health & Hospital System in Dallas is indeed the only AAA-rated hospital in the country, according to CFO John Dragovits, but he says the hospital owes much of this designation to the underlying credit worthiness and credit standing of Dallas County, as well as to the hospitals' strong operating performance.
Dallas County has been AAA rated for 30 years. The hospital, however, had to fight for its AAA rating from both Fitch Ratings and Standard & Poor's. Rating agencies have historically discounted hospital districts by a notch or so because they have the word hospital in their name, says Dragovits.
"The argument is we should have at least the same credit standing as Dallas County since they are the same tax base and the underlying support for the hospital district is the county," he says. "The real story was the fact that we were able to make strong cases to the rating agencies that that was actually the case."
Well, we all like a success story in these tough economic times and attaining a AAA rating is only part of Parkland's recent good news. With many public hospitals facing serious financial challenges, Parkland with 685-beds has been preparing over the last two years for a $1.27 billion construction project, which includes a 862-bed replacement hospital, an outpatient center, office center and parking.
The hospital project has not been without its challenges, though. Leaders have had to contend with gaining tax payer approval for the project during the collapse of the capital markets—a time when states and counties are broke and most hospitals are stalling capital projects. On top of that, leaders faced the prospect of higher than expected interest rates.
So how is a public hospital able to pull off such a feat? Dragovits says it has a lot to do with the Dallas spirit. "Dallas likes winners, and they like winners in everything." To that end, the community has rallied around its safety-net hospital. In November 2008, Dallas County voters approved $705 million general obligation bonds to help pay for the new hospital and agreed to increase property taxes up to 2 ½ cents per $100 of taxable value to pay for the debt service on the bonds. The vote passed by an overwhelming 82%.