Moody's and Standard & Poor's each have downgraded Doylestown Health's credit rating a level, to one notch above junk-bond status.
"The downgrade reflects the organization's multiyear trend of deteriorating operating performance, which was below our expectations for fiscal 2017, and continued weak operations three months into fiscal 2018," S&P Global Ratings credit analyst Kelsey Thomas said in a news release.
In the first quarter of fiscal 2018, which ends next June, Doylestown Health had a $3 million consolidated loss on $79.7 million in total revenue. In fiscal 2017, the Bucks County nonprofit's owner, the Village Improvement Association of Doylestown, recorded a consolidated operating loss of $1.6 million on $323 million in total revenue.
Both credit-ratings agencies cited Doylestown Health's increased spending on doctors as it attempts to shift to a framework in which it is paid based on the results of the care it provides patients, rather than on the volume of services it provides.
Among Doylestown Health's strengths, Moody's and S&P said, are the system's strong market share, increasing revenues, and a comprehensive continuum of care, including long-term care. A high debt load is a key weakness, the agencies said.
The new ratings are BBB- for S&P and Baa3 for Moody's.