Credit rating downgrades for several hospitals and health systems were tied to capital expenditures and cash flow issues in recent months.
The following six hospital and health system credit rating downgrades occurred since June:
- Boone Hospital Center (Columbia, Mo.) — lowered in August from “Ba1” to “Ba3” (Moody’s Investors Service)
“The downgrade to ‘Ba3’ reflects the continued and material deterioration of unrestricted cash, along with simultaneous operational challenges facing BHC,” Moody’s said. “Operating headwinds, along with recent turnover in senior management, will contribute to challenges in attaining performance improvements. These headwinds will include elevated labor and supply costs, partly raised by supply chain system implementation issues, and volume disruption, which has been exacerbated by the on-going pandemic, as well as the absence of state or federal funds in 2022.”
- Jackson Hospital (Montgomery, Ala.) — lowered in August from “Baa3” to “Ba3” (Moody’s Investors Service)
“The downgrade to ‘Ba3’ reflects Jackson Hospital & Clinic’s material and recent deterioration of operating performance and unrestricted cash through June 2022,” Moody’s said. “As a result, headroom to both the debt service coverage and days cash on hand covenants has been materially reduced increasing the risk of a covenant violation, which could lead to immediate acceleration of debt, a governance consideration under our ESG framework.”
- Memorial Health System (Marietta, Ohio) — lowered in July from “BB-” to “B+” (Fitch Ratings)
“The downgrade of the IDR to ‘B+’ reflects MHS’s weak net leverage profile through Fitch’s forward-looking scenario analysis given stated growth and spending objectives,” Fitch said. “While operating performance has stabilized over the past three years … and reflects cost efficiency strategies and pandemic relief funding, improved cash flow funded higher levels of capital spending in fiscals 2020 and 2021.”
- Doylestown (Pa.) Hospital — lowered in June from “Ba1” to “Ba3” (Moody’s Investors Service)
“The downgrade to Ba3 reflects Doylestown Hospital’s … significant and recent decline in operating performance and unrestricted cash reserves through fiscal 2022, which have materially reduced headroom to the days cash on hand covenant (100 days) and increases the risk of an event of default and immediate acceleration as soon as June 30, 2022, a governance consideration under our ESG framework,” Moody’s said.
- Jupiter (Fla.) Medical Center — lowered in June from “BBB+” to “BBB” (Fitch Ratings)
“The ‘BBB’ rating reflects JMC’s increased leverage profile with the issuance of $150 million in additional debt to fund various campus expansion and improvement projects,” Fitch said. “While favorable population growth in the service area and demonstrated demand for services in an increasingly competitive market justify the overall strategic plan and project, the additional debt weakens JMC’s financial profile metrics and increases the overall risk profile.”
- South Shore Hospital (South Weymouth, Mass.) — lowered in June from “BBB+” to “BBB” (Fitch Ratings)
“The downgrade to ‘BBB’ reflects SSH’s track record of very weak operating performance over the last four fiscal years, exacerbated by staffing shortages and other pandemic-related challenges, which are stymying the system’s efforts towards an operational turnaround,” Fitch said.