8 recent hospital credit rating downgrades

The following eight hospital and health system credit rating downgrades occurred in the past six months. They are listed in alphabetical order. 

1. AU Health System (Augusta, Ga.) — from "Baa3" to "Ba1" (Moody's Investors Service)
"The downgrade … reflects the cumulative effect of AU Health System's weak operating performance and very low liquidity which were in part exacerbated by the pandemic," Moody's said. 

2. Catholic Medical Center (Manchester, N.H.) — from "Baa2" to "Baa3" (Moody's Investors Service) 
"The downgrade to Baa3 reflects the continuation of Catholic Medical Center's multi-year trend of modest operating performance which was exacerbated by pandemic related revenue declines that resulted in large operating losses in fiscal 2020," Moody's said. 

3. Guthrie Clinic (Sayre, Pa.) — from "AA-" to "A+" (Fitch Ratings)
"The downgrade … is driven by several years of ongoing operating pressure, which has led to a material weakening of Guthrie's operating profile," Fitch said. "Guthrie's profitability has weakened since 2017 due in part to pressure on volume, growing losses in the physician's group, the acquisition of Cortland Medical Center and more recently pandemic related pressure." 

4. Kuakini Health System (Honolulu) — from "B-" to "CCC" (S&P Global Ratings)
"The lower rating reflects Kuakini's rapid earnings and cash deterioration this past year, with unrestricted reserves falling to $9.9 million as of Dec. 31, 2020, or just 23 days' cash on hand, from $23.3 million as of June 30, 2020," said S&P Global Ratings credit analyst Patrick Zagar. 

5. Mercy Hospital (Iowa City, Iowa) — from "Ba3" to "B1" (Moody's Investors Service)
"The downgrade to B1 reflects the near term challenges that Mercy will face following the large operating loss in fiscal 2020, narrow headroom to the debt service covenant in fiscal 2020 and the pronounced December COVID surge, creating headwinds to retire to historical levels of stronger financial performance," Moody's said. 

6. Summa Health (Akron, Ohio) — from "A-" to "BBB+" (Fitch Ratings)
"The downgrade to 'BBB+' from 'A-' reflects the material change in the leverage ratios, which are now more aligned with the lower rating category," Fitch said.

7. Sutter Health (Sacramento, Calif.) — from "A+" to "A" (Fitch Ratings); from "A+" to "A" (S&P Global Ratings)
"Sutter's balance sheet has historically lagged expectations for its rating and Fitch believes that it lacked the resiliency to support the previous 'A+' rating given the expectations for ongoing margin strain from escalating labor costs ..., legal expenses and uncertainty from a separate federal antitrust lawsuit that is expected to go to trial this fall," Fitch said.

8. Tower Health (West Reading, Pa.) — from "BB+" to "BB-" (S&P Global Ratings); from "BB+" to "B+" (Fitch Ratings)
"The two-notch downgrade reflects our view of Tower Health's continued significant operating losses through the interim period ended Dec. 31, 2020, which have been higher than expected, coupled with recent resignations of members of the senior management team," said S&P Global Ratings credit analyst Anne Cosgrove.

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