South Shore Hospital gets winning bond grade

Jon Chesto

South Shore Hospital has earned another winning grade for its bonds, despite the fact the hospital is preparing to substantially increase its debt load by $40 million early next year.

Fitch Ratings has reaffirmed the ‘‘A-’’ grade that the New York-based ratings agency gave the Weymouth hospital in 2006, as it prepares for a major new bond issue to help pay for a garage and a cardiovascular center.

The Fitch report cited the hospital’s improved operating performance, a strong market share and a rebound in patient volumes. Jim Mitchell, a senior director at Fitch, said South Shore Hospital’s patient revenue has recovered from a dip during its 2005 fiscal year.

‘‘To be a standalone community hospital (close to Boston), I think their performance over the years has been pretty sound,’’ he said. ‘‘For this market, I think they do very well. It’s very competitive.’’

South Shore Hospital’s relatively low operating income performance keeps the hospital from earning a straight ‘‘A.’’ While the hospital’s operating performance improved in the past year, it’s still expected to be well below the median operating margin of Fitch’s ‘‘A’’ grade hospitals next year.

Mitchell said he sees no problems with the hospital’s ability to pay off its debt, despite plans for a $53 million cancer care center and a $20 million parking garage.

‘‘We think the projects they’re doing right now are going to be beneficial for them in the long term,’’ Mitchell said.

Debt ratings play an important role in the interest rates that hospitals and other institutions pay when they issue bonds. The two other big ratings agencies are expected to issue their own reports on the hospital soon.

‘‘Fitch is showing confidence in our organization to expand as we become a regional medical center,’’ hospital spokeswoman Sarah Darcy said.

The hospital is gearing up for a bond issuance that will exceed $90 million, Darcy said. The bond sale will include about $50 million to refinance existing debt and $40 million in new debt to help pay for the 560-space parking garage and the cardiovascular center that opened in the spring. Preliminary site work for the garage began a few weeks ago, Darcy said.

The hospital will also issue $60 million in bonds later in 2008 to help pay for the 85,000-square-foot cancer center, Darcy said. That expansion will be financed through one bank and not the public debt markets, she said. Work on the cancer center, which will feature doctors from the Dana-Farber Cancer Institute and Brigham and Women’s Hospital, is slated to begin next year and finish sometime in 2009.

Jon Chesto may be reached at jchesto@ledger.com.

The Patriot Ledger