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Fitch: Hawaii Pacific Health Outlook Revised to Negative

Analysis  |  By Jack O'Brien  
   January 13, 2021

The Honolulu-based nonprofit health system faces constrained margins due to the COVID-19 pandemic.

Fitch Ratings revised the outlook for Hawaii Pacific Health (HPH) from "stable" to "negative," according to a notice issued Wednesday afternoon.

While Fitch affirmed HPH's issuer default rating and revenue ratings on bonds issued by the state's Department of Budget & Finance and the Public Finance Authority on behalf of HPH, the Honolulu-based nonprofit health system faces constrained margins due to the COVID-19 pandemic.

The notice was released just over a month after Fitch revised its 2021 outlook for nonprofit hospitals from "stable" to "negative."

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"HPH's leverage metrics also weakened in 2020 as adjusted debt increased, driven in part by a higher operating lease liability of $125 million reported on the balance sheet, which was higher than the previously estimated figure of $65 million using Fitch's five-time multiple of the annual operating lease expense," the notice read.

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Fitch noted that HPH's debt increased due to borrowing $50 million in fiscal year 2020 to address "unanticipated larger pension contribution for the system."

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The ratings agency did note that HPH benefits from "solid market position" as one of the two largest healthcare providers in the Aloha State. Other strengths from HPH are is "manageable debt levels" and liquidity of approximately 240 days cash on hand, according to Fitch.

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Jack O'Brien is the Content Team Lead and Finance Editor at HealthLeaders, an HCPro brand.


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