Moody’s has downgraded Cleveland-based University Hospitals’ rating to “A3” from “A2.”
The downgrade reflects continuing weak financial performance over a protracted period and modest liquidity, despite improvements, Moody’s said in a May 5 report. The ratings agency said the health system has a limited cushion to absorb potential federal funding costs or investment market volatility.
University Hospitals has a stable outlook at its new rating, reflecting Moody’s view that the system’s “position, turnaround initiatives, and moderating capital spend will help stabilize performance and liquidity.”
Moody’s said the system’s position as the second-largest health system in Northeast Ohio and strategies to improve patient access will drive strong demand and revenue growth. The ratings agency added that the completion of a major systemwide EHR transition to Epic and turnaround strategies will improve cash flow.
“Strong fundraising and discipline around capital spending will help stabilize cash, following a boost from asset sales last year,” Moody’s said. “However, ongoing labor and other cost inflation that exceed rate increases will result in slower improvement than previously expected.”
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