Moody's has downgraded UPMC's credit rating a notch, citing risks from the health system's expansion in the central part of the state.
The change, from Aa3 to A1, moves the credit rating on $2.9 billion in UPMC debt to “low credit risk” from “very low credit risk,” according to a Moody's rating guide. The credit remains investment grade, according to the guide.
UPMC finalized its acquisition Sept. 1 of PinnacleHealth, a four-hospital system based in Harrisburg. The move follows UPMC's acquisition of UPMC Susquehanna and other affiliations in the central part of the state, where Highmark has also been pursuing new partnerships.
UPMC's expansion in the area “carries its own competitive challenges given the presence of sizable providers who are consolidating, as well as the lackluster economy of the local service area,” a Wednesday Moody's summary states.
“Rating agencies tend to value stability rather than the kinds of growth strategies being pursued by UPMC,” UPMC spokesman Paul Wood said in an email. “While Moody's A1 rating reflects a concern about execution risks, UPMC has a long track record of successfully integrating hospital systems and improving care in the communities we serve across the state.”
The summary cites “below average financial performance” at UPMC in recent years as contributing to the change, while saying that it acknowledges the system's “strong position as a sizeable integrated healthcare delivery system with distinctly leading and growing market share in Western Pennsylvania.”
The system recently reported operating income of $240 million on revenues of $14 billion for the 2017 fiscal year, which ended June 30.
Wes Venteicher is a Tribune-Review staff writer. Reach him at 412-380-5676, wventeicher@tribweb.com or via Twitter @wesventeicher.
