Fitch downgraded Houston-based Texas Children's Hospital's rating to "AA-" from "AA."
The downgrade reflects Texas Children's "material underperformance in profitability," which is driven by multiple factors, Fitch said in its July 9 report. Those factors include weaker than expected volumes in its Houston market, a delayed opening of a new Austin inpatient facility and operating headwinds faced by its health plan.
Those factors contributed to an operating loss of $198.1 million (-6.4% operating margin) through the first six months of fiscal 2024, according to the report.
Fitch said it believes Texas Children's has a solid balance sheet for the lower rating, "providing ample financial flexibility for management to turnaround operations."
"This is especially true given the organization's position as a nationally known, premier provider of a full continuum of pediatric care and high-end OB/GYN services," Fitch said.
Texas Children's has a stable outlook with Fitch.