Moody's affirmed Orlando (Fla.) Health's "A2" rating but lowered its outlook to stable from positive after it acquired eight hospitals in October.
On Oct. 1, Dallas-based Tenet Healthcare completed the sale of its 70% majority ownership interest in Birmingham, Ala.-based Brookwood Baptist Health to Orlando Health. On Oct. 24, Orlando Health completed the acquisition of three Florida hospitals and related physician practices from Dallas-based Steward Health Care.
Moody's said in a Nov. 13 report that the change in outlook is driven by a meaningful increase in debt — about 46% — related to the acquisitions, as well as an anticipated reduction in days cash on hand related to an expanded expense base.
The ratings agency said Orlando Health's historically strong operating cash flow will be diluted by its new, underperforming assets. Moody's noted, however, that Orlando Health's management has a demonstrated ability to execute growth strategies, which will help offset the risks from its acquisitions, "particularly in Birmingham, a brand new, highly competitive market."