Moody's downgraded Escondido, Calif.-based Palomar Health's rating to "B2" from "Baa3."
The downgrade reflects "very thin" cash balances, ongoing cash flow losses and Moody's expectation that June 30, 2024 covenants will be breached, the ratings agency said in an Oct. 22 report.
Moody's said that prior financial challenges were exacerbated by a cyberattack on the system's outpatient arm, Palomar Health Medical Group.
"These factors contribute to Palomar's escalating governance risks in the areas of financial strategy and risk management, as well as management credibility and track record, a key driver of the rating action," Moody's said.
Moody's has also placed the system's ratings under review as it assesses risks related to breaching financial covenants, according to the report.