Inspira HealthEarns AA Rating
Fitch Ratings has affirmed the ‘AA-’ rating on approximately $627 million of revenue bonds issued by New Jersey Health Care Facilities Financing Authority on behalf of Inspira Health Network, NJ (Inspira). Fitch has also affirmed Inspira’s Issuer Default Rating (IDR) at ‘AA-’.
The ‘AA-’ ratings reflect Fitch’s expectation that improved cash flow, following the successful integration of Inspira Medical Center of Mannington (IMC Mannington, formerly Salem Medical Center), will allow Inspira to restore stressed leverage metrics resulting from the 2024 bond issuance to fund the Mullica Hill patient tower that is scheduled for completion in early 2027.
Fitch expects that operating performance will recover to levels consistent with historical performance, with operating EBITDA margins gradually improving to around 10 percent following three years in which operating EBITDA margins were compressed, averaging about 5.0 percent. Fitch believes that the current trend of operating improvement supported by implemented strategies, along with the planned additional capacity at Mullica Hill, will support a return to operating margins and debt service coverage consistent with the strong operating risk assessment while Inspira rebuilds the balance sheet. The rating also reflects Inspira’s leading market position in a stable service area and large medical staff supported by a growing residency program.
Fitch’s base case shows Inspira’s key leverage metrics remain consistent with the suggested thresholds of a strong financial profile assessment. In Fitch’s stress case, cash to adjusted debt dips to about 100 percent and gradually rebounds to close to over 150 percent (year five), and net adjusted debt to adjusted EBITDA remains favorably negative through the scenario, consistent with the lower end of the ‘AA’ rating category given the midrange revenue defensibility and strong operating risk profile.
Inspira has the leading market position with an approximate 52 percent market share in its primary service area in southern New Jersey. Continued enterprise growth is supported by numerous access points, efforts to reduce outmigration through partnerships and service line development, and a large residency program that bolsters physician recruitment and retention. Competition stems primarily from Thomas Jefferson University and The Cooper Health System (IDR: A+) with about 13 percent and 8.6 percent market share, respectively.
The Mullica Hill expansion project remains on schedule and within budget and will add up to 86 additional beds and allow for the expansion of strategic service lines including maternal child health, neurosciences, cardiology and oncology. The successful acquisition and integration of the 68-bed IMC Mannington has generated $10.3 million in incremental margin for Mullica Hill and Vineland, alongside expanding market share in Salem County. The opening of a new 43,000-square-foot satellite emergency department and inpatient behavioral health unit at Woodbury should secure market share and drive increased revenue and patient volumes.
