6 recent hospital credit rating downgrades

Credit rating downgrades for several hospitals and health systems were tied to cash flow issues and management turnover in recent months. 

The following six hospital and health system credit rating downgrades occured since September:

1. Willis-Knighton Medical Center (Shreveport, La.) — lowered in March from "A1" to "A2" (Moody's Investors Service)
"The downgrade to A2 reflects expectations that Willis-Knighton will continue to face challenges in achieving budgeted operating cash flow margins due to heightened wage pressures and volume softness," Moody's said. 

2. OU Health (Oklahoma City) — lowered in March from "Baa3" to "Ba2" (Moody's Investors Service)
"The magnitude of the downgrade to Ba2 reflects projected cashflow in fiscal 2022 that will be materially below prior expectations, from an escalation of labor costs, and reliance on a financing to avoid a further decline in already weak liquidity and potential covenant breach," Moody's said. "Also, the rating action reflects execution risk given a prolonged period of management turnover with several key positions unfilled or filled with interim leaders, a governance consideration under Moody's ESG classification."

3. Catholic Health System (Buffalo, N.Y.) — lowered in February from "Baa2" to "B1" (Moody's Investors Service) 
"The downgrade to 'B1' anticipates minimal cashflow and a further significant decline in liquidity this year, following material losses in fiscal 2021 from a 40-day labor strike and the disproportionately severe impact of the pandemic, both social risks under Moody's ESG classification," the credit rating agency said. 

4. Delta County Memorial Hospital (Delta, Colo.) — lowered in November from "BB" to "CCC+" (S&P Global Ratings)
"The lower rating and negative outlook reflect our view of DCMH's unsustainable financial trajectory due to its rapidly declining cash, the filing of two waivers due to debt service coverage covenant violations in 2019 and 2020, as well as operating losses and underlying cash declines continuing through interim 2021," said S&P Global Ratings credit analyst Blake Fundingsland. "The negative rating action is also driven by our view of DCMH's increased governance risks under our environmental, social and governance — or ESG — factors assessment due to its poor risk mitigation culture related to management as well as the board's unwillingness and/or lack of progress in resolving the waivers to eliminate debt acceleration risk." 

5. Adventist Health (Roseville, Calif.) — lowered in September from "A+" to "A" (Fitch Ratings)
"The one-notch downgrade to 'A' reflects Adventist's historically solid operating income levels, which have more recently, through a series of one-time events and the lingering deleterious impact from the novel coronavirus, resulted in lower than anticipated operating EBITDA margins," Fitch said. "Strength of the credit is still conferred through Adventist's position as the leading acute care provider in multiple growing markets, a gradually improving balance sheet, and accretive affiliation and expansion activity."

6. Marin General Hospital (Greenbrae, Calif.) — lowered in September from "BBB+" to "BBB" (Fitch Ratings)
"The downgrade of MH's revenue bond rating ... is driven by weak balance sheet metrics and financial profile due to multiple years of low operating cash flow generation that have fallen short of levels needed to prevent significant cash deterioration," Fitch said. "Operating cash flow constraints reflect the confluence of large capital spending at a time that was complicated by a material decline in utilization during the pandemic and before the hospital had an opportunity to implement meaningful cost control measures."

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