Dive Brief:
- The University of Pennsylvania Medical Center announced plans to sell $350 million in 2014A bonds and $50 million in 2014B bonds for capital investments and debt refinancing. The bonds were assigned an AA- rating by Fitch because of UPMC's market share of 61% in Allegheny County.
- Fitch said UPMC's negative outlook was based on competition from Highmark, the area's dominant insurer. The insurer and UPMC have been part of a turf war since 2011 when Highmark began the process of purchasing West Penn Allegheny Health System. UPMC announced it would not renew its contract with Highmark.
- The plans have since gone back-and-forth on contracting with patients. A five-year transition agreement has been created, but was questioned by lawmakers and has yet to be finalized.
Dive Insight:
The outlook on the bonds is negative mainly because of the ongoing feud with Highmark. The increased competition, coupled with UPMC's reliance on Highmark insurance members poses a challenge to the provider, even with its large market share. With the issue affecting its credit rating, it is imperative that UPMC and its competitor work their issues out as quickly as possible. Forecasters report that signing the Highmark UPMC Consent Decree and the impending finalization of a strategic plan will help to moderate the organization's credit rating.
Want to read more? You may enjoy this story on the Highmark Health gamble and the risks of hospital-insurer integration.