Moody’s upgraded Doylestown (Pa.) Health’s rating to “A3” from “B2” following Philadelphia-based Penn Medicine’s acquisition of the system.
Doylestown and Penn signed a nonbinding letter of intent in January 2024 to merge. Doylestown Health said that it had met certain financial goals to clear a path for the merger in late July 2024. The acquisition was completed April 1.
Moody’s said April 7 that the upgrade of Doylestown’s rating reflects the merger, “which strongly links its credit profile to its parent organization.” It also includes the “strong likelihood that financial performance will improve as it takes advantage” of Penn Medicine’s large economies of scale to manage expenses and targeted clinical investments to increase market share and patient volume.
Penn Medicine has an “Aa3” rating and stable outlook with Moody’s.
The rating agency said offsetting considerations include Doylestown’s stand-alone weak operating cash flow and liquidity, elevated levels of debt, and Penn Medicine’s current lack of legal payment obligation for Doylestown’s debt.
Moody’s said that Doylestown’s ratings are under further review for an upgrade and the agency assesses the pace of integration and clarification on plans regarding Doylestown’s outstanding debt.
“Successful integration of operations and/or the legal assumption of Doylestown’s debt would further bolster Doylestown’s credit profile,” Moody’s said.
