Renton, Wash.-based Providence will lose out on about 6 percent of its operating revenue because of its separation from Hoag Memorial Hospital Presbyterian in Newport Beach, Calif., Fitch Ratings said Jan. 28.
The health systems on Jan. 10 announced they reached an agreement that would allow Hoag to become an independent entity after being affiliated with Providence for nearly 10 years. Hoag cited several reasons for wanting to end the affiliation, including that it undermined local decision-making and constrained its ability to meet the needs of local patients.
The separation was effective Jan. 19, according to Fitch.
As a result of the separation, coupled with Providence's current operational trajectory, Fitch placed Providence on rating watch negative. Fitch said the separation has credit implications because Hoag provided about 6 percent of its operating revenues each year and 17 percent of the system's unrestricted cash and investments.
Fitch said it will reevaluate a credit-rating change no later than the end of the first quarter. If a credit-rating downgrade is issued, it would be about one notch, Fitch said.
Providence, which operates more than 50 hospitals, currently has an "AA-" rating with Fitch.