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Pa. nonprofit health-care providers had a rough year with credit ratings

Fitch Ratings and Standard & Poor's said the state's highly competitive market for hospital services contributed to the relatively weak performance.

Pennsylvania’s nonprofit hospital sector stood out Thursday during presentations by two major credit-ratings agencies on the financial outlook for the new year.

But not in a good way.

Fitch Ratings said Pennsylvania hospitals and health systems accounted for five of its 21 hospital downgrades nationwide last year ― a ratio that is far out of proportion with the number of health system ratings it has in the state.

In a Standard & Poor’s Global Ratings 2024 outlook presentation, Pennsylvania stood out as having the nation’s fourth-highest percentage of health systems receiving downgrades or getting a negative outlook change. The figure in Pennsylvania was 53% as of Nov. 30. A negative outlook is a warning that a rating could be cut if trends don’t improve.

Both agencies cited Pennsylvania’s tough hospital market, particularly in the Philadelphia and Pittsburgh regions.

“Most of our credits in Pennsylvania are in the hypercompetitive Philly and Pittsburgh markets,” S&P analyst Patrick Zagar said. He said the weak demographics, such as an aging population, also contributed to the financial weakness. People 65 and older qualify for Medicare, which typically pays lower rates than commercial health insurance.

Don’t expect much improvement in 2024, the agencies said.

“We think we’ve got another tough year ahead of us,” said Kevin Holloran, who heads Fitch’s nonprofit health-care and higher education ratings group.

S&P has a similar view, with a negative outlook on a record 24% of the health-care nonprofits it rates nationwide, Zagar said. “A downgrade with a negative outlook is not unusual these days,” he said.

S&P’s downgrades of Pennsylvania hospitals and health systems through Nov. 30 were: Penn State Health, Tower Health, Grand View Health, and Redeemer Health.

The Philadelphia-area systems with S&P outlook revisions to negative were Main Line Health, Redeemer Health, Temple University Health System, and Thomas Jefferson University (as well as its acquisition target Lehigh Valley Health Network).

Fitch’s only downgrade in the Philadelphia area was Tower Health. The agency revised its outlooks on Main Line Health and Redeemer Health to negative.