Baton Rouge-based Franciscan Missionaries of Our Lady Health System expects to make some capital investments in the Mississippi hospital it acquired this year.
FMOLHS told Moody’s Investors Service during a recent credit rating process it expects to invest in an emergency room at St. Dominic’s Health System, based in Jackson, Mississippi. A new electronic medical record system is also being considered; the organization told Moody’s.
FMOLHS, which also operates Our Lady of the Lake and recently opened a new children's hospital in Baton Rouge, hired a performance improvement consultant to tackle losses at St. Dominic's over the next two years, according to its Moody's credit rating material which is used for investors to examine the business before buying bonds which are used as capital in the organization.
Franciscan Missionaries of Our Lady Health System’s CEO Richard Vath declined to outline specific details of the St. Dominic’s investment and those in Lafayette — where the organization acquired Women's and Children's from HCA Healthcare this year — citing nondisclosure agreements.
“We can’t share any details, but it’s clearly a focus because St. Dominic’s joined us in July officially, there’s some work in Jackson to try and expand to grow and continue in our existing markets,” Vath said. “There are ongoing conversations around all of our particular markets … there’s some continued conversation in Lafayette, but again, I can’t really share a lot of details.”
St. Dominic's will diversify the health system's portfolio as it’s the only hospital outside of Louisiana. But it will only provide a boon to its balance sheet if it can be turned around financially since it generates $500 million in revenue and has become 20% of overall health system revenues.
FMOLHS already has $567 million in outstanding debt for which Moody's affirmed an A2 rating. Its operating revenue hit $2 billion in 2018, and in 2019 it grew to $2.8 billion with the acquisition of the Mississippi hospital.
Moody's described that FMOLHS had a 10.5% operating cash flow margin which was due to growth in all of its markets with "strong performance" at St. Francis in Monroe. Some of that boost was due to the Louisiana state surplus.
Other projects mentioned to Moody’s, which projected a stable outlook for FMOLHS in mid-October for $260 million in proposed taxable bonds which would mature in 2049, included an expansion of the intensive care unit at Our Lady of the Lake in addition to renovations of the Women’s and Children’s hospital in Lafayette and two new operating room suites at St. Francis in Monroe. The organization also recently completed a large scale electronic medical record system upgrade.
Plans for the intensive care unit in Baton Rouge is for neurointensive care, which refers to a specialty in neurology. The organization also expects to open a $3.3 million 10-room surgical neonatal unit inside the new Children’s Hospital in 2020.
Management told Moody’s that it expects to “streamline governance and become a more integrated delivery system.”
The stable credit rating for the organization this year and in August 2018 was an improvement compared to 2017 when the rating agency’s outlook was negative on a $150 million bond.
Several years ago, the organization had made a commitment to operational, patient care and financial performance amid an otherwise difficult health care market in Louisiana, Vath said.
“We had some new leaders who came into the organization and they started that work,” Vath said. “That worked and the road map that was laid down really turned (St. Francis) around.”
Now the organization continues to look at its future in a holistic way as a system.
“We continue to move towards decision making as an operating company model so we’re trying to get more efficient and effective,” he said. “We wanted to make sure that we had sustainability to grow even beyond the children’s hospital.”
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