Moody's: Nonprofit Healthcare Debt Sees Record Downgrade

"Sometimes," Wexler says, "strategy costs upfront. It's not necessarily the wrong thing to do. It's just the risk profile changes because of it and if it's the right strategy it is going to bear itself out over time with the credit profile."

Linda MacDonald, vice president of treasury services at Catholic Health Initiatives, says the downgrades were not completely unexpected, but come as the health system grapples with major strategic moves that necessitated floating about $1.5 billion in bonds.

"Our financials were quite good last year. However, we did experience those volume declines and weaker or negative revenue growth," MacDonald says. "We are not immune to those types of occurrences, but what really caused our downgrade was the issuance of debt in such a large amount."

"It was a large issuance of debt that pretty much changed our profile. We were able to access the market with a $1.5 billion issuance, the largest issuance of an organization of our type ever done, so we were a little bit in unchartered territory."

MacDonald says CHI used about $550 million of the new debt to finalize the "sponsorship" of the remaining 50% of Omaha-based Alegent Creighton Health.