Several health systems across the United States had their Health System Rating Downgrades in the year 2024. Due to increasing operational costs, continuous financial deterioration, and severance employment conditions, the hospitals’ rankings have been under pressure. Fitch Ratings and Moody’s Investor Service have recently presented several downgrades reflecting the healthcare sector’s escalating financial risks.
Studying these downgrades may also provide some insight into the current problems in the healthcare industry. Here are the key Health System Rating Downgrades in 2024 and what they portend for them in the next phase.
1. Adventist Health
Fitch downgraded the rating of California based Adventist Health to “BBB+” from “A.” This change was mainly as a result of the increase in the health systems leverage, which was due to capital expenditure on two hospitals from Tenet Healthcare. Under the agreement, Adventist Health expects to incur about $750 million in long-term debt.
2. Allina Health
Fitch downgraded the credit rating of Minneapolis based Allina Health from “AA – “ to “A+”. Detailed below are the operating challenge posted in the last two years coupled with balance sheet numbers more consistent with the ‘A+’ rating which led to this credit downgrade.
3. Cabell Huntington Hospital
Moody’s placed Cabell Huntington Hospital in West Virginia in the same credit rating tier and demoted it from “Baa2” to “Baa3.” The downgrade was mainly due to the fact that the hospital had been experiencing a sharp decrease in the amount of unrestricted cash and investments.
4. Columbia Memorial Hospital
Fitch has downgraded the rating of Columbia Memorial Hospital located in Astoria, Oregon from A- to BBB+. The low cash reserves of the health system after the floatation of its 2024 bonds toward expansion was another consideration for the downgrade.
5. Frederick Health Hospital
A hospital in Frederick, Maryland, known as Frederick Health Hospital had their rating downgraded to “BBB+” by Fitch from “A-”. The health system experienced a decelerated operating performance recovery, indicating further operating strain in 2024.
6. Heritage Valley Health System
Heritage Valley Health System located in Beaver, Pennsylvania has been downgraded from ‘A+’ to an ‘A’. This was due to further operating and other operating losses which has now stretched over four years of excess losses.
7. Holy Redeemer Health System
Fitch also downgraded Holy Redeemer Health System, located in Meadowbrook, Pennsylvania from “BB+” rating to “BB-“rating. The downgrade also stemmed from significantly negative operating performance for more than one year that eroded the System’s financial maneuverability.
8. Jackson Hospital & Clinic
Moody’s Investors Service downgraded the Jackson Hospital & Clinic, Montgomery, Alabama from “B1” to “Caa2”. We saw earlier that the system’s cash flow and its financial strength have worsened significantly hence the need for this downgrade.
9. John Fitzgibbon Memorial Hospital
Fitch downgraded the credit rating of John Fitzgibbon Memorial Hospital; located in Marshall, Missouri to ‘CCC-‘ from ‘CCC’. Fitch has cited other operational issues while noting that the market had light volume and that the payer mix was difficult.
10. Marshfield Clinic
The healthcare institution in Wisconsin known as Marshfield Clinic received a warning on a downgrade from Fitch from the rating of “BBB+”. The health system experienced difficulty in increased operating costs which did not correlate with its fluctuating income, and a higher medical loss ratio on the health plan as compared to the set budget.
11. Mount Sinai Health System
Moody’s downgraded to ‘Baa3’ rating status from the ‘Baa1’ one that Mount Sinai Health System based in New York City controls, and also changed the outlook to negative. Some problems that have contributed to the downgrade include the delay in the closure of Beth Israel hospital and the disruption that was occasioned by a cyberattack on Change Healthcare.
12. Overlake Hospital Medical Center
Moody’s down graded Overlake Hospital Medical Center at Bellevue in Washington state from “Baa1” to “Baa2”. This led to a downgrade due to the erosion of liquidity position and the expected poor recovery in the financial value.
13. Palomar Health
The healthcare company Palomar Health in California was downgraded to ‘BB+ by Fitch from previous ‘BB-’. This downgrade was a result of problems associated with reduced sales volume and higher costs as a result of inflation after the pandemic.
14. Penn Highlands Healthcare
The Fitch rating service revised the Penn Highlands Healthcare, based in DuBois, Pennsylvania, downgrade from ‘A negative’ to ‘BBB.’ The cut was attributable to lower-than-expected fiscal performance through fiscal 2024.
15. Sierra View Local Health Care District
The outlook on the current ‘A’ rating has also been revised downward from stable to negative after Fitch downgraded Sierra View Local Health Care District in Porterville, California. The downgrade resulted from a $16 million loss in fiscal year 2023.
16. Texas Children’s Hospital
Texas Children’s Hospital in Houston also felt the heat with Fitch stripping off its credit rating to “AA-” from “AA”. This was due to the system’s weak revenues, notably lower volumes in its Houston market and also the system’s decision to delay its new inpatient facility in Austin.
17. Tufts Medicine
Due to slow operating improvement and decrease of unrestricted cash Tufts Medicine, situated in Burlington, Massachusetts was downgraded by Fitch from ‘BBB’ to ‘BBB-’.
18. Westchester County Health Care Corp.
Moody’s Investors Service cut the rating on Valhalla, New York-based Westchester County Health Care Corp. to “B1” from “Ba1.” The downgrade due to a downturn in liquidity and cash flow losses more pronounced than believed possible.
19. West Tennessee Healthcare
Moody’s downgraded West Tennessee Healthcare based in Jackson, Tennessee from “A2 to A3.” This downgrade was due to weakened liquidity measures, and a slow recovery of performance.
Conclusion
It is evident from the many Health System Rating Downgrades witnessed in 2024 due to the financial woes of health systems countrywide. Growth in operating costs, post-COVID-19 effects, and recurrent losses remain challenges for healthcare providers. These Health System Rating Downgrades suggest that it might take longer to get back to the original state as many systems are now required to adjust to operating in the current financial climate.
