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Tower Health, reeling from losses, receives a three-notch credit downgrade from Fitch

The downgrade came just four months after a previous cut.

Chestnut Hill Hospital, which is one of six acquired by Tower Health since 2017, had an operating loss of $9 million on on $63 million in revenues in the six months ended Dec. 31.
Chestnut Hill Hospital, which is one of six acquired by Tower Health since 2017, had an operating loss of $9 million on on $63 million in revenues in the six months ended Dec. 31.Read moreTower Health

Tower Health on Monday received a massive three-notch credit downgrade from Fitch Ratings, which cited average monthly losses of $14 million and warned that further multi-notch downgrades are possible if Tower is unable to change its financial trajectory.

The new rating is B+, which is deeper in junk-bond territory. On Oct. 30, Fitch had slashed Tower’s rating by two notches, BB+ from a solid BBB, but expected “that Tower would return to a stable operational position and gradually improve its balance sheet.”

That didn’t happen.

Instead, Tower lost $111 million in the last three months of last year and ended the year with significantly less cash on hand to run its hospitals and other operations than it had had the end of September. Fitch said Tower’s financial condition is weak even for its new, dramatically lower credit rating.

Tower’s board last week decided that it would look for a “partner” for the entire health system, which is anchored by Reading Hospital in West Reading. That means the entire system could be acquired, though experts are skeptical that the money-losing system with $1.5 billion in debt will garner much interest.