Fitch Ratings downgraded Care New England's issuer default rating to "BB-" from "BB," one day after the Providence, R.I.-based system resumed partnership talks with Lifespan.
Fitch said that the downgrade was based on several factors, including margin pressures from the current COVID-19 pandemic as well as other operational challenges that existed for the health system before the pandemic.
"Fitch believes that the pandemic has brought on additional collaboration and new urgency to the on-and-off again discussions with Lifespan for a local solution to the long-term struggles faced by Rhode Island's two largest health systems," the agency wrote.
Fitch noted that resuming negotiations doesn't mean the two Providence-based systems will finalize a deal. It predicted another difficult year for Care New England, resulting in a potential debt service coverage breach, even with federal funding to offset pandemic-related expenses and losses.
Fitch removed Care New England's rating watch negative and assigned it a negative outlook.
Read the full rating change, commentary here.