UPMC has recently issued just over $1.6 billion in taxable and tax-exempt bonds that will help the integrated system refund prior debt and fund investments into its facilities, according to financial statements and comments from a spokesperson.
The total is made up of $800,000 in taxable, fixed-rate bonds, nearly all ($792.7 million) of which the system said in filings it anticipates will be used for “general corporate purposes.”
It also includes $571.3 million in fixed rate, tax-exempt bonds and a $250 million bond UPMC anticipates will be purchased directly by JPMorgan Chase Bank, according to filings.
The latter two collections of bonds are primarily intended “to finance various capital expenditures” ($525 million) and refund or refinance debt ($344.4 million), UPMC said in the filings.
Together, the bonds represent UPMC’s largest issuance to date. It had issued just over $900 million in bond issuances last year.
In March, Fitch Ratings assigned (PDF) an “A” rating to the anticipated series of 2023 bonds, excluding the $250 million bond anticipated for direct purchase. The group also gave a “positive” rating outlook.
A representative of the system said that the referenced capital projects include “UPMC’s continuing investments in its facilities and communities, the largest of which is the new patient tower at UPMC Presbyterian in Pittsburgh. UPMC continues to grow as it reinvests in our communities and facilities.”
The UPMC Presbyterian expansion is slated to open in 2026. The project is targeting a “digital, high-tech” 17-story inpatient tower with 636 private rooms and 900,000 square feet of space.
Pittsburgh-based UPMC is coming off a tight year. The integrated system saw its operating income drop to $238 million (0.9% margin) and its net losses surpass $1 billion during the fiscal year ended Dec. 31, 2022, thanks to a combination of investment losses and higher expenses across both its care delivery and insurance services businesses.
As of Dec. 31, the 40-hospital organization had $8.7 billion in total cash and investments (down from the previous year’s $10.7 billion) and 109 days of cash on hand (down from 148). It also spent $994 million on capital expenditures in 2022, up from $782 million in 2021.
“Investments in our operations and continued capital improvements are expected to become increasingly important as the competitive environment of the market and national changes to the industry continue to shift the landscape of healthcare,” the system’s management wrote in a 2022 year-end earnings disclosure.