OREANDA-NEWS. S&P Global Ratings raised its long-term rating one notch to 'A' from 'A-' on the Michigan State Hospital Finance Authority's fixed-rate series 2006A and 2009 bonds, issued for Henry Ford Health System (HFHS).

In addition, S&P Global Ratings assigned its 'A' long-term rating to the Michigan Finance Authority's $821 million series 2016 fixed rate hospital revenue refunding bonds, issued for HFHS. The outlook on all ratings is stable.

"The upgrade reflects a significant turnaround for HFHS in fiscal 2015, based on audited results through Dec. 31, 2015," said S&P Global Ratings analyst Kevin Holloran. "Management attributes the notable improvement to stable patient volumes and significant progress on its Strength & Sustainability plan to reduce costs and improve value"

The turnaround comes after multiple years of weak financial performance (stemming back to fiscal 2012) that accelerated dramatically in fiscal 2013, largely as a result of the costs associated with a large-scale Epic installation, further exacerbated by limited top-line revenue growth relating to decreased inpatient volumes.

The stable outlook incorporates our expectation that over the balance of the outlook period, HFHS will sustain and build upon recently improved operations, and that the associated cash flow will continue to bolster key balance-sheet metrics.

While unlikely, the rating could come under pressure if operating income levels are not sustained, or if unanticipated borrowing or future strategic decisions dilute balance-sheet metrics beyond current levels.

We could raise the rating or revise the outlook to positive over the outlook period if the improvements in operating income levels are sustained and if HFHS' balance sheet continues to build unrestricted liquidity levels according to projections.