Fitch Maintains Baystate Health’s Credit Rating
SPRINGFIELD — Fitch has affirmed Baystate Health’s credit rating of A+ and Negative Outlook. Baystate delivered first-quarter results better than budget and at a break-even operating margin with stronger volumes and improvements in core operations.
Fitch ratings are used by investors to make decisions about investments, lending, and other financial arrangements. Fitch, one of the ‘Big Three’ credit-rating agencies, uses a scale of AAA to D to indicate likelihood of default. An A rating reflects high credit quality with a low expectation of default.
Fitch’s rating affirmation reflects a largely new senior management team, including a new chief executive officer, chief operating officer, chief strategy officer, and chief transformation officer, who have initiated a comprehensive, multi-year, more than $225 million transformation plan. The affirmation also reflects Baystate’s essentiality as the largest health system in Western Mass. and an integrated operating model with a system composed of an academic medical center, community hospitals, more than 1,000 employed providers, and a health plan. Fitch expects operations to steadily improve, with margins rising over the next three to four years, which support the A+ rating.
The Negative Outlook reflects operating losses of $61 million in 2024 and $63 million in 2023 and the transformation plan’s execution risk. Post-pandemic, Baystate encountered a prolonged clinical, operational, and monetary shock to its system, experiencing more than $300 million in operating losses. Additionally, Medicare and Medicaid have grown to more than 70% of the health system’s overall revenue. Baystate alleviated some stress by selling its reference laboratory business in 2024 to pay down a line of credit and terminate its defined-benefit pension plan.
In the last nine months, Baystate has optimized its new organizational structure and streamlined decision-making processes to be more efficient and effective. The leadership team has implemented reductions in both management and corporate overhead. The team is in the process of executing seven other core operations improvement workstreams, including supply chain, pharmacy, and revenue cycle management.
“Through Baystate’s strategic planning process — Baystate Health 2030 — we have fully embraced clinically driven and physician-led leadership for our academic and community safety-net integrated delivery system,” said Peter Banko, president and CEO of Baystate Health since June 2024. “Strategic growth (including a hyper-focus on access and patient experience), core transformation cost improvements, and the integration of Health New England will accelerate our ability to be the economic and health pillar of Western Massachusetts.”