Fitch affirms Main Line’s ratings

Fitch Ratings has affirmed Main Line Health System’s (Main Line) Issuer Default Rating (IDR) and the ratings assigned to approximately $603 million of revenue bonds issued by the Chester County Health & Educational Facilities Authority on behalf of Main Line at 'AA-'.

Fitch added that Main Line’s rating outlook has been revised from stable to negative.

Main Line is an integrated healthcare system serving the counties of Chester, Delaware and Montgomery in Pennsylvania and the western portion of the city of Philadelphia. The system includes four acute care hospitals, one acute rehabilitation hospital, an inpatient substance abuse facility, six major ambulatory health centres, a home health agency, a multispecialty physician group practice, a freestanding basic science and clinical research facility, five charitable foundations, and, through joint ventures, an accountable care organization, a captive insurance company and five ambulatory surgery centres.

According to Fitch the outlook revision to negative reflects continued pressure on operations. In FY23, Main Line reported a $136 million operating loss, which was weaker than budgeted expectations and follows a similar loss in FY22. While management has articulated a performance improvement plan, operating losses are expected to persist in FY24, albeit at reduced levels. If operations deteriorate beyond management's expectations it could result in rating pressure, as additional margin compression could dilute liquidity and leverage metrics.

However, the rating agency added that the affirmation of the 'AA-' rating reflects Main Line's good market position in a favourable service area with strong market share in key clinical service lines, despite a very competitive market. The 'AA-' rating also reflects Main Line's favourable balance sheet metrics, which despite years of reduced cash flow and elevated capital spending are still in line with the rating.