Moody's Investors Service upgraded its bond rating yesterday for the University of Pennsylvania Health System to "Aa3" from "A1."

The company said the hospital system was in better financial shape because of strong patient demand and a good relationship with the University of Pennsylvania, whose bond rating was also upgraded earlier this year.

Significant growth in unrestricted cash will allow the system to fund its $922 million capital-spending program over the next several years without issuing debt, Moody's said.

The system faces challenges from other large academic medical centers and powerful insurers.