PROVIDENCE, R.I. (WPRI) — A major Wall Street ratings agency has downgraded Care New England’s bond rating, citing ongoing financial challenges that have been exacerbated by the coronavirus pandemic.
S&P Global Ratings lowered its long-term rating on the hospital group’s debt from BB- to B+ and said the outlook is negative. The move came less than two months after S&P had put the nonprofit corporation’s credit on watch.
“The downgrade reflects weak pre-COVID-19 financial performance and our expectation for a significant loss in fiscal 2020,” S&P analysts said in a report issued Tuesday.
“The pandemic has exacerbated an already tenuous financial situation for CNE, although we believe there could be some improvement by year-end due to actions underway by management to reduce expenses, receipt of federal and state grants and stimulus funds, and Medicare accelerated payments,” they continued.
Care New England owns Women & Infants, Kent and Butler hospitals, and is one of Rhode Island’s largest employers. Jess McCarthy, a spokesperson for CNE, said the downgrade “is not unexpected.”
“The business of health care is difficult, especially with the addition of a pandemic that effectively stalled a majority of non-COVID related services for some time,” McCarthy said in a statement. “CNE continues to keep patient wellness as our first and uncompromised priority, with our business management teams working to ensure that the best financial decisions are being made for continued access for all people to the care that is needed within this region.”
In explaining its rationale, S&P said Care New England has a “long history of weak financial performance” as well as “a balance sheet that we consider vulnerable.” While its performance improved in the two years after Memorial Hospital closed, the current fiscal year — which ends Sept. 30 — was already “very weak” even before COVID-19 worsened the situation.
The hospital group is at risk of violating its covenants with bondholders and may need to reach agreements with them to address that, according to S&P.
One bright spot cited by the S&P analysts was the recent announcement that Care New England is once again resuming merger discussions with Lifespan, the state’s largest hospital group, after years of on-again off-again talks over combining the two. They said they view the move “positively,” while acknowledging it’s unclear whether anything will come of the latest effort.
S&P also said a pending deal to sell part of the old Memorial Hospital campus in Pawtucket should yield about $9 million for Care New England if it receives court approval.
Ted Nesi (firstname.lastname@example.org) is WPRI 12’s politics and business editor and a Target 12 investigative reporter. He is a weekly panelist on Newsmakers and hosts Executive Suite. Follow him on Twitter and Facebook