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How Good Shepherd Health System Jumped Four Moody's Ratings

By Jack O'Brien  
   April 23, 2018

CFO Michael Cheek discusses how joining CHRISTUS Health System improved the system's cash flow, liquidity, and operational outlook. 

Good Shepherd Health System (GSHS), which operates two acute care hospitals, trauma centers, a joint venture home health agency, as well as other ancillary medical services, saw its Moody's ratings improve by four levels.

Moody’s raised the Longview, Texas–based system’s rating from Caa1, the highest Caa level, to Ba3, the lowest Ba level. If an organization is rated Caa, Moody's rates a system to be of "poor standing and subject to very high credit risk," whereas those in Ba "have speculative elements and are subject to substantial credit risk."

GSHS suffered for years from declining patient volumes, rising costs, and severe operational challenges prior to joining CHRISTUS Health System, a Catholic nonprofit that oversees more than 60 hospitals and hundreds of medical facilities, in February 2017.

Improvement in the Moody's ratings were due in large part to CHRISTUS management, including a service line review regarding different services offered by GSHS as well as strategies to improve cash flow and liquidity.

In FY 2017, GSHS had $42 million on hand, due to "significant losses and turnaround costs." By the end of 2017, GSHS improved to $45 million on hand, though it still had low liquidity relative to debt at 32% cash-to-debt. During the first quarter of 2018, GSHS also reported an operating cash flow of $18.8 million, compared to the $8 million operating cash flow loss in FY 2017. 

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.

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