Moody’s Issues Zero Texas Upgrades in 2017 as Ratio of Upgrades to Downgrades Dips

The ratio of upgrades to downgrades issued to not-for-profit hospital systems by Moody’s looked worse in 2017 than it did the year prior, and the Lone Star State failed to register a single upgrade, according to a new report by Moody’s Investors Service.

North Texas played home to a pair of downgrades in 2017, the only two in Texas last year. They were Tyler-based East Texas Medical Center Regional Healthcare System and Sulphur Springs-based Hopkins County Hospital District.

Overall, Moody’s downgraded 41 hospital systems in 2017 versus just 12 upgrades. The ratio of 3.4-to-1 compares to 1.5-to-1 in 2016, when Moody’s issued 32 credit upgrades and 21 credit downgrades.

The report attributes elevated rating activity to “credit stress — including a national nursing shortage, volume moderation and ongoing reimbursement pressures.”

In September, large Nashville-based operator Ardent Health Services bought East Texas Medical Center, pulling in UT System on the deal. Ardent pledged a $150 million investment while the University of Texas System Board of Regents approved $35 million, as well as a rebrand to UT Health East Texas.

The rural Hopkins district was acquired by Christus Health System in 2016. It was downgraded in August 2017, Moody’s spokesman Dave Jacobson said. However, because the structure of the deal specifies that Christus did not guarantee any of the Hopkins County Hospital District’s outstanding debt, the downgrades apply to Hopkins rather than Christus.

Christus bought a 51 percent stake in the system, according to this Modern Healthcare story.

Jacobson pointed out a couple of caveats to keep in mind. For one, a health system that operates within the state but is headquartered elsewhere wouldn’t register as a Texas upgrade or downgrade.

For two, several hospitals in Texas are considered “municipal” ratings rather than “healthcare” ratings because there’s a municipality backing them by issuing debt. It’s usually a county, as in in the case of the North Texas Medical Center, which filed for Chapter 9 bankruptcy last year. That system voted in early February to take on new management from Plano-based Community Hospital Corp.