How Good Shepherd Health System Jumped Four Moody’s Ratings
Good Shepherd Health System (GSHS), which operates two acute care hospitals, trauma centers, a joint venture home health agency, as well as other ancillary medical services, saw its Moody’s ratings improve by four levels.
Moody’s raised the Longview, Texas–based system’s rating from Caa1, the highest Caa level, to Ba3, the lowest Ba level. If an organization is rated Caa, Moody’s rates a system to be of “poor standing and subject to very high credit risk,” whereas those in Ba “have speculative elements and are subject to substantial credit risk.”
GSHS suffered for years from declining patient volumes, rising costs, and severe operational challenges prior to joining CHRISTUS Health System, a Catholic nonprofit that oversees more than 60 hospitals and hundreds of medical facilities, in February 2017.
Improvement in the Moody’s ratings were due in large part to CHRISTUS management, including a service line review regarding different services offered by GSHS as well as strategies to improve cash flow and liquidity.
In FY 2017, GSHS had $42 million on hand, due to “significant losses and turnaround costs.” By the end of 2017, GSHS improved to $45 million on hand, though it still had low liquidity relative to debt at 32% cash-to-debt. During the first quarter of 2018, GSHS also reported an operating cash flow of $18.8 million, compared to the $8 million operating cash flow loss in FY 2017.
Process and partnership paying off
Two years ago, GSHS sought a partner to help address the financial and operational issues facing the system.
Reflecting on the first year with CHRISTUS, Cheek advised systems facing a similar situation to choose a partner with the best match of organizational culture. GSHS has adopted the faith-based CHRISTUS culture, which Cheek said is consistent with the historical roots of the system’s commitment to care for the community.
Cheek said GSHS is honored to have the support of CHRISTUS as a partner, leading employees to feel “proud and positive” about the organization’s future prospects after one of the best years in “a long, long, time.”
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