In early 2017, Christus Health System finalized a deal to bring Longview-based Good Shepherd Health System under its direction. Late last week, the Irving-based not-for-profit’s efforts to turnaround Good Shepherd were recognized by Moody’s Investor Service.
Moody’s raised Good Shepherd’s bond rating by four notches, from Caa1 to Ba3. Under the new rating, Moody’s says the hospital’s bonds have speculative elements and are subject to substantial credit risk. The old rating had the bonds judged to be of poor standing and subject to very high credit risk.
Why the change? Well, Moody’s is high on the new ownership from Christus, writing that the marriage “will continue to bring financial strategic benefits as a rapidly executed turnaround is quickly increasing cashflow and liquidity.” After more than a year under Christus, Moody’s says Good Shepherd has reaped “material financial and strategic benefits.”
The outlook could improve further, Moody’s notes, if Good Shepherd sustains the results for a longer period of time and pays or restructures its $69 million in 2017A bonds.
Christus Good Shepherd Health System has two acute care hospitals, including its flagship Good Shepherd Medical Center in Longview. The system is part of Christus’ expanding Northeast Texas Region.
The region includes the Hopkins County Hospital District, acquired by Christus in 2016, which was on the wrong end of a Moody’s opinion just last year. However, because the structure of that deal specified that Christus did not guarantee any of the district’s debt, the downgrade applied to Hopkins rather than Christus.
The upgrade to Good Shepherd comes after a year—2017—in which not a single Texas health system received an upgrade, and the overall ratio of upgrades to downgrades dropped. It also comes in conjunction with Moody’s affirmation of Christus Health System’s A1 rating, which cited the turnaround effort.
In a statement to D CEO Healthcare, Christus Health Chief Operating Officer Jeff Pucket attributed the success to strong leadership and collaboration across the region, growth in clinical services, and a focus on patient satisfaction:
“We worked in a very collaborative manner to address core operations and financial issues that served as a springboard for re-establishing CHRISTUS Good Shepherd Health System as a market leader in health care services in the Longview/Marshall communities,” the statement reads. Pucket adds: “We are confident that we will continue to see progress at CHRISTUS Good Shepherd Health System as part of our major commitment to further investing and developing our Northeast Texas network that will expand the provision and access to high quality care for the communities of Northeast Texas.”