Philadelphia hospital operator Main Line Health downgraded by Moody’s


Moody’s Investors Service downgraded to A1 from Aa3 $651 million of outstanding debt issued for Main Line Health System, a not-for-profit hospital operator managing four large facilities in the Philadelphia area.

The rating agency said Thursday’s downgrade reflected “a multi-year trend of weak operating performance,” resulting in budget shortfalls analysts expected to continue into 2023.

Moody’s also pointed to growing competition in health services around the Philadelphia metro area and suburbs.

Main Line Health System’s Riddle Hospital in Media, Pennsylvania. Cash funding of capital projects has lowered the hospital system’s liquidity, Moody’s said.

Main Line Health

Those budget shortfalls can be attributed, in part at least, to the cash funding of capital projects by the operator recently, including the $327 million modernization of its Riddle Hospital campus launched in 2020.

Moody’s also changed the debt’s outlook to stable from negative at the new lower rating.

It cited “still-strong balance sheet metrics which provides for some cushion and expectations that performance improvement plans will allow for better, albeit still weak, profit margins in fiscal 2023, and continued improvement thereafter.”

The rating action follows Fitch Ratings’ Nov. 10 downgrade of Main Line Health’s issuer default rating to AA-minus from AA. Fitch cited lower revenue and a balance sheet “moderated in recent years due to additional debt” for downgrading $594 million of bonds issued by the Chester County Health and Educational Facilities Authority on behalf of Main Line.

“Main Line has a long track record of generating very strong operating metrics, which suggest that long-term its operating profile could rebound,” Fitch’s report said. “We believe that Main Line’s sound liquidity and ability to curtail capital spending during this period of stress, given its history of very healthy capital investment, provides it with ample flexibility as it works to stabilize operations.”

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