Moody's Investors Service downgraded Palo Alto, Calif.-based Lucile Packard Children's Hospital's credit rating to "A1" from "Aa3."
Additionally, Moody's assigned its "A1" rating to Lucile Packard Children's Hospital's proposed $200 million series 2017A revenue bonds, issued by the California Health and Finance Authority. The bonds will mature in 2057.
The downgrade is a result of several factors, including LPCH's 32 percent increase in debt due to the new bonds, poor operating performance, challenging payer mix, increased spending from an expansion project and temporary reduction of high revenue services. Moody's also acknowledged the hospital's healthy balance sheet, strong market position, affiliation with Stanford University and favorable revenue growth.
The outlook is stable, reflecting Moody's expectation that the hospital will see improved operating performance and balance sheet metrics in fiscal year 2018 to offset the heavy debt load.
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