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Why Moody’s Downgraded Providence St. Joseph Health

Analysis  |  By Amanda Schiavo  
   April 10, 2023

The organization expects margins to remain weak in 2023.

Providence St. Joseph Health, a Renton, Washington-based non-profit-Catholic healthcare provider that is part of the Providence Health and Services healthcare system, received a rating downgrade on its revenue bond debt to A2 from A1 by Moody’s Investor Service.

Moody’s has also revised its outlook on Providence St. Joseph Health to negative from stable.

"The downgrade to A2 is driven by our expectation that margins will remain weak in 2023 with the majority of cash flow going to fund capital expenditures and that PSJH will not be able to materially reduce debt or increase liquidity over the near term," Moody’s said in its analysis. " Operating results were very weak in 2022 (FYE 12/31), with PSJH producing negative cash flow. Additionally, debt measures weakened materially due to a 30% increase in debt over the year (excluding debt associated with Hoag Hospital, which disaffiliated with PSJH in January 2022), and liquidity balances declined though to a lesser extent as the debt was primarily used to preserve unrestricted balance sheet liquidity."

In March both S&P Global and Fitch Ratings downgraded their ratings on Providence St. Joseph Health for reasons similar to Moody’s.

"The negative outlook reflects the magnitude of PSJH's current operating challenges, and our expectation that while margins will improve in 2024, absolute cash flow will remain low and be only sufficient to cover capital expenditures," Moody’s said in its report. "We also expect debt and liquidity metrics to not decline below current levels."

Amanda Schiavo is the Finance Editor for HealthLeaders.

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