The ratings agency also affirmed the “AA/A-1+,” “AA/A-1” and “AA/A-2” short-term underlying ratings on several of the health system’s variable-rate demand bonds.
The long-term ratings affirmation is based on Dignity Health’s overall strong enterprise profile and its solid historical revenue growth. The short-term ratings affirmation is based on S&P’s rating of the individual letter-of-credit backed bank issuing the bonds.
“The outlook remains negative despite some improvement in operating performance through the current year-to-date, as a longer track record of improved performance and some balance sheet improvement are important to revise the outlook to stable,” said S&P analyst Martin Arrick.
The ratings agency commented on the health system’s pending affiliation with Englewood, Colo.-based Catholic Health Initiatives. According to S&P Global Ratings, the potential affiliation with CHI — a lower rated entity — would most likely lower Dignity Health’s rating. However, analysts note the agency would need to evaluate the organizations’ affiliation plan in order to make any post-merger rating determination.
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