DBRS Confirms McGill University Health Centre at A (high)

DBRS has today confirmed the rating on the Series A Senior Unsecured Debentures (the Debentures) of the McGill University Health Centre / Centre universitaire de santé McGill (MUHC or the Hospital) at A (high) with a Stable trend. The Hospital recorded an operating deficit of $13.2 million in 2013–14, beating the budget deficit forecast of $20 million and reversing a notable deterioration in operating performance in 2012–13. The rating continues to be supported by the essentiality of MUHC to Québec’s health-care system, strong funding support from the Province of Québec (rated A (high) with a Stable trend by DBRS) and a substantial base of foundation assets. Relations with the Ministère de la Santé et des Services sociaux and the Agence de la santé et des services sociaux de Montréal have also evolved in a constructive manner following the appointment of a special provincial monitor to oversee the implementation of Baron Committee Report recommendations and the restoration of financial sustainability amid a complex transition of numerous clinical activities to the Glen Campus site.

At the time of the last review, DBRS noted that financial performance was becoming inconsistent with the current rating, and that a rating action was probable if concrete steps were not taken to restore operating balance on a realistic timeline. In the intervening period, MUHC’s financial outlook has improved following the implementation of a series of significant cost-containment measures. As anticipated, addressing budget deficiencies now principally involves internal budget cuts and process optimizations rather than top-up government funding. Given improvements in recent financial performance, the Hospital expects that operating equilibrium will be restored in fiscal 2014–15, despite the difficulty in finding incremental internal savings and ongoing provincial funding compression. Although DBRS deems the Hospital’s budget targets as achievable and is encouraged by the progress made to date in restoring financial prudence, any material deviations from the projected path to balance could renew downward pressure on the rating.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodology is Rating Canadian Public Hospitals, which can be found on our website under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.