The ratings agency Moody’s has downgraded WakeMed’s bond rating one notch but says the outlook for the Raleigh hospital system is stable.
Moody’s said the downgrade from A1 to A2 stems from WakeMed’s new strategy of aligning itself closer with a large group of physicians as well as a debt offering that is planned for this fall. That offering is expected to pay for previous capital improvement projects.
Moody’s said it does not expect WakeMed’s investments to significantly reduce its operating performance below current levels, noting that the hospital system operates in a high-growth area. Its recently opened women’s hospital in North Raleigh also should draw a favorable mix of patients, Moody’s wrote.
Earlier this year, Raleigh-based Rex Healthcare also had its bond rating reduced by Standard & Poor’s. The downgrade came in advance of Rex’s sale of $150 million in bonds to finance the construction of its N.C. Heart & Vascular hospital.
Like Rex, WakeMed said its downgrade was expected.
“We were not surprised by this shift as it is consistent with Rex Healthcare’s recent rating, reflecting the strength of both organizations in our market as well as the challenges of operating in a dynamic and changing health care landscape,” Donald Gintzig, WakeMed’s president and CEO, said in a statement.
Both UNC Healthcare, which owns Rex, and WakeMed have made large investments installing Epic’s electronic records system. WakeMed has also spent money establishing an accountable care organization, WakeMed Key Community Care, and building its WakeMed North women’s hospital.
Moody’s noted that one of the things that could make WakeMed’s bond rating fall further is if it is unable to achieve the projected results from its accountable care organization.
The organization is designed to improve patient care and reduce hospital admissions and procedures. The incentive for creating an ACO is the federal “Medicare shared savings” program, which allows medical providers to share up to 50 percent of the savings they generate from following new efficiency guidelines.