Citing a reduction in third quarter losses and the recent recruitment of physicians to key leadership positions, Fitch Ratings on Thursday affirmed the West Penn Allegheny Health System's bond rating at B+ and revised its outlook from "evolving" to "stable."
The rating "reflects the continued progress and expected finalization of the affiliation with Highmark," the Fitch release said, pointing to lowering operating losses in the January to March period "as the system starts to benefit from the ramping up of operations at West Penn Hospital."
The report comes days after Moody's Investors Service affirmed its WPAHS rating at Caa1 for its $737 million in Series 2007 fixed rate bonds.
The Fitch analysis has a notably more upbeat tone than Moody's, which predicted Highmark would need to spend much more than the $475 million it has committed to stabilize West Penn Allegheny.
"We are pleased that Fitch has revised its opinion, stating that WPAHS has a stable outlook based on our improved financial performance and planned affiliation with Highmark," said WPAHS spokeswoman Kelly Sorice on Thursday.
"We will continue to push forward by further improving our operations, recruiting additional physicians and offering patient-focused, high quality care."
Fitch analysts said the affiliation agreement between Highmark and WPAHS, currently under review by the state officials, "is viewed positively" and they said West Penn Allegheny should be able to meet its debt obligations as long as the Highmark affiliation is finalized by next May.
"Fitch believes WPAHS's viability hinges on the successful execution of the affiliation with Highmark," the report said. "If the affiliation agreement is not finalized, a multi-notch negative rating action is likely to occur."
Among West Penn Allegheny's recent physician hires are Howard Edington, who will be chairman of the health system's department of surgery beginning in August, and Blair Anderson Jobe, who will direct WPAHS's new Institute for the Treatment of Esophageal and Thoracic Disease beginning July 1.
Both doctors were recruited from positions at UPMC.
Steve Twedt: email@example.com or 412-263-1963. First Published June 22, 2012 12:00 AM