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June 11, 2018

MaineHealth earns strong credit ratings ahead of issuing bonds for $512M expansion

Courtesy / Maine Medical Center
Courtesy / Maine Medical Center
An artist's rendering of the East Tower portion of Maine Medical Center's $512 million expansion. The East Tower is scheduled to be completed by late 2019. Last week, MaineHealth earned strong credit ratings from two agencies ahead of its plans to borrow more than $300 million to finance Phase 1 of the expansion.

About MaineHealth

MaineHealth is a nonprofit integrated health system consisting of eight local hospital systems, a comprehensive behavioral health care network, diagnostic services, home health agencies, and more than 1,500 employed and independent physicians working together through an Accountable Care Organization. With close to 19,000 employees, it is the largest health system in northern New England and provides preventive care, diagnosis and treatment to 1.1 million residents in Maine and New Hampshire.

Two credit rating agencies have affirmed the strong financial position of MaineHealth, northern New England's largest health care system, as the organization readies itself to borrow for an expansion project at its flagship hospital, Maine Medical Center.

The favorable ratings review is significant in light of MaineHealth's plans to borrow more than $300 million to finance Phase 1 of the $512 million MMC expansion.

Moody's Investors Service last week assigned a rating of A1 to the first component of approximately $300 million in bonds to be issued by MaineHealth for the expansion project. Rating agency Standard & Poor's stated last week it would maintain its rating of A+ with a stable outlook for the health care system as the initial bonds are issued.

The ratings place MaineHealth in the top tier of New England health care systems, according to a news release from MaineHealth. Only Partners HealthCare, the system parent of Massachusetts General Hospital, and Yale New Haven Health in Connecticut have stronger financial ratings.

"This speaks to how well positioned we are as a system to serve the 1.1 million people in our service area," said Bill Caron, president and CEO of MaineHealth, a system with eight hospitals serving the 11 southernmost counties in Maine as well as Carroll County, N.H.

Unification effort boosted ratings

At a time when many rural health care organizations have struggled, MaineHealth has consistently exceeded its financial goals, largely on the strength of Maine Medical Center, the state's largest tertiary care center, according to its news release.

Caron also credited member organizations across the system for that strong performance, noting the rating agencies looked favorably on the work being done at the system's smaller hospitals under challenging circumstances.

"Some of our local health systems are operating in very difficult environments. Rural communities have a higher proportion of patients with Medicare and Medicaid coverage, which doesn't always pay the full cost of care," Caron said. "They are also challenged by the migration of complex procedures, and the dollars they generate, to larger medical centers due to technology."

To cope with these pressures on rural health systems, MaineHealth is moving to create a unified operating, financial and governance model, allowing local health systems to more easily share resources across the system. This "unification" initiative was discussed extensively in local communities in 2017 and ultimately approved by member boards.

This year, MaineHealth is working through the mechanics of bringing its members together in a formal way on Jan. 1, 2019.

Both Moody's and Standard & Poor's cited the pending governance and corporate restructuring at MaineHealth as steps that will strengthen the system's long-term financial outlook. The agencies also said the investment in Maine Medical Center should position the hospital system to meet patient demand in future years.

In its rating announcement, Moody's said unification would "strengthen overall system governance and management and drive efficiencies over time." Standard & Poor's announcement cited "MaineHealth's robust enterprise profile with a dominant presence in southern, western and coastal Maine, including in Portland where Maine Medical Center's business and financial growth leads the system."

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