PHOENIX - San Francisco-based Dignity Health had its outlook revised to negative from stable by Standard & Poor's, which cited a decline in financial performance.

"The outlook revision reflects a weakening financial profile, including weaker cash flow and coverage of maximum annual debt service over the past 18 months,” S&P analyst Martin Arrick wrote in an April 13 report. "The drop in unrestricted reserves is a particular concern, because historical cash flow remained sound for the rating, in part due to the strength of nonoperating revenues, which are currently well down from recent peaks in fiscal 2014," Arrick said.

The hospital chain has performed relatively well in providing services to the public, the report said. In 2012 the hospital chain changed its name from Catholic Healthcare West to appeal to a broader patient audience.

The rating agency affirmed its A long-term rating and underlying rating on the issuer, which had some $5.4 billion outstanding at the end of the last calendar year according to disclosure documents posted to EMMA. S&P also affirmed its AAA/A-1+, AAA/A-1, and AAA/A-2 ratings on several series of Dignity Health's variable-rate demand bonds.

A downgrade would be likely if the issuer fails to improve operating margins to levels more consistent with rating medians over the next one to two years, S&P said.

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