OREANDA-NEWS. S&P Global Ratings revised its outlook to stable from negative and affirmed its 'A' rating on California Health Facilities Financing Authority's long-term rating and underlying rating (SPUR) on outstanding tax-exempt and taxable bonds (various series and various issuers), issued for Adventist Health Systems/West (Adventist Health), Calif.

In addition, S&P Global Ratings assigned its 'A' long-term rating to CaliforniaHealth Facilities Financing Authority's, $274.245 million series 2016A refunding revenue bonds, issued for Adventist Health.

We also affirmed our 'AA/A-1+' rating on the authority's series 2009B bonds issued for Adventist Health whereby the long-term component of the rating is based on the application of joint criteria (assuming medium correlation) reflecting the ratings on U. S. Bank and Adventist Health. We based the short-term component of the rating solely on U. S. Bank's letter of credit, which expires on Jan. 10, 2019.

"Adventist Health's financial performance has strengthened considerably due in large part to the recognition of the benefit of California's provider fee program, but also due to operational improvement initiatives surrounding system-wide standardizations and revenue cycle enhancements, which began to yield noticeable benefits in fiscal 2014 and have been sustained through fiscal 2015 and into fiscal 2016 year-to-date," said S&P Global Ratings analyst Kevin Holloran. "In addition, we believe that Adventist Health's solid enterprise profile, with considerable revenue diversity, with 19 hospitals in four distinct western regions, provides some, but not unlimited, cushion for management to continue to implement strategies to strengthen the financial profile."

The stable outlook reflects our view of Adventist Health's recently improved and sustained operating margins, combined with Adventist Health's solid enterprise profile, with good revenue and earnings diversity.

We could lower the rating or revise the outlook to negative if key balance sheet metrics weaken from current levels, or if pro forma strategic spending exceeds Adventist Health's ability to absorb additional debt and/or spending. Given the recent and significant operational turnaround, Adventist Health has additional flexibility at the existing rating level; however, we would view any return to operating margins below 2% as a sign of rating weakness.

While not anticipated at this time, we could raise the rating to 'A+' if Adventist Health balances planned strategic spending with general balance sheet growth, and continued strong operating margins.