Continued operating losses at Oregon Health & Science University have triggered a prominent bond ratings agency to cut the institution’s rating of its financial health.
The rating company, S&P Global Ratings, earlier this month cut OHSU’s rating to A+ from AA--. The agency gave OHSU a “stable outlook.”
“The lower rating reflects the multiyear trend of operating losses and a larger than expected operating loss in fiscal 2024,” which ended June 30, the agency said. The “stable” qualifier reflects OHSU’s large and growing investment portfolio, wrote credit analyst Blake Fundingsland.
OHSU’s underlying operations will “gradually improve” in the current fiscal year, which started July 1, he predicted.
The news comes as OHSU is advocating for state approval to take over financially troubled Legacy Health, which, like much of the industry, reported significant losses during the pandemic. OHSU has portrayed itself as a shelter in the storm for Legacy despite its own problems, which include making hundreds of layoffs to stem losses. The deal faces significant opposition.
S&P’s ratings range from AAA to D. The “investment grade” tier is AAA through BBB, so OHSU remains in that top tier. Generally, the higher the bond rating, the lower the interest rate an institution pays in order to borrow.
OHSU has struggled with fast-rising expenses, especially for salaries, even as revenues from increased patient volumes have also risen. It says it is implementing a cost-curbing and revenue-enhancing plan, but it is not yet breaking even when it comes to operations.
For the three months ended Sept. 30, the first quarter of the current fiscal year, OHSU reported a loss of $9 million on operating revenues of $1.33 billion. That’s an improvement from the same quarter a year earlier, when it recorded an operating loss of $34 million on operating revenues of $1.2 billion.
For the entire fiscal 2024, which ended June 30, OHSU reported an operating loss of $110 million on operating revenues of $5 billion, its filings show.
OHSU and its foundation have investment portfolios totaling about $3 billion.
Investment growth and income are recorded separately from operating results.
In the most recent quarter, OHSU’s investments grew by $84 million, reflecting the strong stock market.