Moody's: Nonprofit Healthcare Debt Sees Record Downgrade

Wexler says three large health systems: Catholic Health Initiatives in Colorado, Dignity Health in California, and Memorial Sloan-Kettering Cancer Center in New York accounted for nearly $13 billion of the $20 billion total.

"Some of this has to do with consolidation activity, ramping up of debt not necessarily for reasons that have to do with credit deteriorations," Wexler says.

"Sometimes as organizations grow they swell a little bit and if the judgment bears out to be the right strategy they go back to where they were. If you take something like Memorial Sloan-Kettering and the downgrades that affected almost $2 billion, that does aid in skewing the dollar downgraded debt but certainly the rating they remain at it's very healthy. They have a lot of strategies that they're executing upon. It creates more risk but risk is relative—Aa2 versus Aa3. But at the end of the day, it still speaks to the downgrade of a large amount of debt."

Wexler says Moody's expects that if the cost of floating bonds remains at near-historically low levels, then there will be more financing of future strategies. "That has contributed to organizations executing on what seem to be very healthy strategies at maybe a pace that has them swell a little bit more."