UMass Memorial $177M offering now more investor-friendly

SAM BONACCI UMass Memorial President and CEO Dr. Eric Dickson announcing that 500 information-technology jobs would be brought to downtown Worcester by the end of 2017. The system's investment in its IT department is a factor for its increased attractiveness to investors.

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By Emily Micucci

Fitch Ratings has issued an ‘A-‘ rating to UMass Memorial Health Care as the Central Massachusetts healthcare system seeks to raise $177 million to pay for facility upgrades and refinance existing debt.

Fitch said in a statement that the outlook for the organization is stable. As key drivers of the improved rating, Fitch cited the system’s market position, which includes 43 percent of the inpatient market share in Central Massachusetts, improved operating results beginning in fiscal 2014, adequate liquidity, leverage and plans for capital investment.

Regarding capital plans, Fitch specifically cited UMass Memorial’s $700 million information-technology investment, saying the cost of adopting a new electronic health records system called EPIC will be worth it over the long term.

Sergio Melgar, chief financial officer for UMass Memorial, said the system will go out to borrow money in later this month. Of the $177 million, the system plans to use about $60 million to fund facility upgrades at the University and Memorial campuses in Worcester, including work on the electrical systems and converting double rooms to private rooms. The remainder will be used to refinance bonds borrowed in 2005 and 1998, according to Fitch.

Melgar said receiving an ‘A-‘ from Fitch — an investment-grade rating — saves the system millions of dollars by the time the bonds mature in 2040. Standard & Poor’s has issued a BBB+ rating for UMass Memorial, a step down from the Fitch rating but still an investment-grade rating. Moody’s rating stands at BA1, a lower investment grade. However, Melgar said he expects Moody’s to boost its rating later today, given the news from Fitch.