Moody’s May Downgrade UMass Memorial Credit Rating

For the second time in as many months, a credit rating agency is examining downgrading the credit rating for UMass Memorial Health Care.

Moody’s Investors Service announced Tuesday that it’s looking into downgrading UMass’s BBB+ rating (equivalent to a Baa1 on Moody’s scale) due to a deteriorating operating performance and a thin operating cash flow. The move would affect nearly $300 million in debt.

UMass is operating at a 4.1-percent deficit with just a 1.2-percent cash-flow margin through nine months of the 2013 fiscal year, according to Moody’s. The health care system also faces negative pressure on patient volumes and a delay in the receipt of Medicaid supplemental funding, the agency said.

Moody’s plans to probe UMass’s 2014 budget as well as its initiatives to contain expenses and benefits before it reaches a decision on the credit rating. In recent months, UMass Memorial has brought in a new CEO, a new president for UMass Medical Center and an interim chief financial officer.

Standard and Poor’s Rating Services downgraded UMass Memorial’s credit in mid-August from A- to BBB+ and warned that a lower rating is possible if UMass continues to post operating losses beyond 2013. UMass Memorial also agreed to pay the state $66,000 last month to settle allegations that it sent unpaid bills to a Worcester homeless shelter in order to collect reimbursements from the state.

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