5 health systems hit with rating downgrades

A number of health systems experienced downgrades to their financial ratings in recent weeks amid ongoing operating losses and challenging work environments.

Here is a summary of recent ratings since Becker's last roundup Sept. 21:

The following systems experienced downgrades:

Main Line Health (Radnor Township, Pa.) — downgraded debt rating from "AA" to "AA-" in November (Fitch Ratings)

The downgrade reflects "significant operating losses" in fiscal year 2022, ending June 30, and is in relation to $594 million of bonds the health system holds. While downgrading that specific rating, however, Fitch described the healthcare group's outlook as stable and said that it will benefit from a good market position in a favorable service area with strong market share.

Fitch described "continued expense challenges" facing the hospital group over the next two years as part of its decision to downgrade the debt rating.

Hannibal (Mo.) Regional Healthcare System — lowered financial outlook in November from stable to negative amid uncertainty around the hospital group's capital spending plans (Fitch Ratings)

"The Negative Outlook reflects uncertainty around capital spending and the potential issuance of new debt to address infrastructure issues at the system's main campus and expand inpatient/outpatient capacity," Fitch said. "A master facilities planning process has begun, but cost estimates and timing are not yet available and the board has not approved any potential projects." 

Fitch also affirmed default ratings for HRHS at "A-."

ChristianaCare (Newark, Del.) was issued a negative outlook in October (S&P Global Ratings)

Pressures from the pandemic and industry challenges have led to a "volatile operating performance" in the last three years, and ChristianaCare has a small revenue base compared to similarly rated health systems, S&P said,

"The negative outlook reflects [ChristianaCare's] operating volatility and balance sheet deterioration that, while largely stemming from COVID-19 pandemic and industry pressures, are not characteristic of the 'AA+' rating level and could lead to a downgrade during the outlook period," Chloe Pickett, an S&P credit analyst, said in the firm's report.

The S&P also affirmed ChristianaCare's "AA+" long-term rating based on the health system's leading business position within its service area and healthy balance sheet, according to an Oct. 27 report.

MultiCare Health System (Tacoma, Wash.) had various debt obligations downgraded in October from"AA-" to "A+" (Fitch Ratings)

The downgrades included the healthcare system's existing bond ratings and $430 million of fixed rate taxable notes as well as the group's Issuer Default Rating.

"The downgrade of MultiCare's IDR to 'A+' from 'AA-' reflects the considerable operating stress the system is facing in the current fiscal year, in combination with balance sheet metrics that have moderated as a result of equity market volatility and a recent debt issuance," Fitch said.

Wise Health System (Decatur, Texas) was downgraded to "BB+" from "BBB-" in regard to various debt obligations as it struggles with continued operating challenges (Fitch Ratings)

Wise Health System's Issuer Default Rating and the ratings on series 2014A, 2021A, 2021B and 2021C hospital revenue bonds issued by Decatur Hospital Authority on behalf of Wise were all downgraded.

"The downgrade reflects the change in Fitch's assessment of Wise's operating risk and financial profiles to 'bb' from 'bbb' due to deterioration in the hospital's operating performance through six-months (ended June 30) and the expectation of sizable operating and net losses in 2022," Fitch said.

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