The Record
Tuesday, July 14, 2009
BY MARY JO LAYTON

The cost of opening a second hospital could stress Hackensack University Medical Center financially, according to analysts who downgraded the hospital’s credit rating this week.

Moody’s Investors Services noted that Hackensack has failed to meet its own operating projections, its debt has more than doubled since 2003, and it has suffered significant losses from investments. All of this comes at a time when it has committed $10 million — on top of the $26.1 million already spent — to the 128-bed hospital it wants to open at the former Pascack Valley Hospital in Westwood.

“We do not believe that HUMC has the cash resources to devote to this new strategy without detracting from its current risk file and already weak balance sheet,” the report concluded.

Analysts also noted that the hospital, Bergen County’s largest employer, is weighing staff reductions that could result “in significant savings.”

Still, while the new hospital would be costly in the short term, Moody’s concluded that it may result in improved market share for Hackensack in the future — a strategy essential to long-term growth.

“Over the long term it could be great and work out for them, but in the short term it’s not helping their credit,” said Pamela Federbusch, a Moody’s credit analyst.

Robert L. Glenning, Hackensack’s chief financial officer, said the hospital anticipated a downgrade in its ratings but noted that analysts considered the institution’s financial outlook “stable.”

“Like many public and private-sector institutions impacted by this recession, we realized a substantial loss on our investments,” Glenning said. “We will continue to be financially responsible in order to provide the best care to our patients.”

The hospital’s bond rating slipped from A3 to Baa1, one notch below the median rating for health care institutions nationally, but better than the average rating for a New Jersey hospital, Federbusch said.

“It’s still a decent rating,” she said.

The hospital, which has an operating budget of $1.1 billion and 45,038 admissions annually, remains a dominant provider. In fact, the hospital’s operating income in the first quarter of the year has improved to $10.6 million, well ahead of the $6.5 million in the first quarter of 2008, the report said.

Besides the financial data, the report on the state’s busiest hospital provides many details about Hackensack’s battle to expand its reach into Bergen County.

In addition to $26.1 million already spent to purchase the Westwood facility, Hackensack would spend $10 million into the joint venture with Legacy Partners, a Texas-based for-profit company. The total cost to reopen is an estimated $100 million. Hackensack would own 35 percent of the hospital, according to the report.

The protracted fight with opponents — Englewood Hospital and Medical Center and The Valley Hospital in Ridgewood — will cost additional management time and resources, Moody’s noted.

Read the complete article at northjersey.com