Moody's Investors Service last week downgraded to A2 from A1 its rating on the Detroit-based Henry Ford Health System, one of the state's largest providers.
The move affects $855 million of outstanding bonds issued through the Michigan State Hospital Finance Authority.
The outlook is stable at the lower rating.
The downgrade reflects a "marked downturn" in the system's operating performance during the first nine months of 2012 compared to 2011's "already low performance level and which is below our expectations for a continuation of improvement begun in fiscal year 2010," Moody's said in the downgrade report, released last week.
A weak regional economy and competitive health care environment add to the pressures facing Henry Ford, which operates four acute-care hospitals and several outpatient facilities.
Pressures could be relieved at least in part if a proposed merger between Henry Ford and Beaumont Health System is completed, analysts said.
The two systems in late October signed an exclusive, 120-day letter of intent to explore a partnership.
Moody's said it expects Henry Ford's cash flow pressures to continue throughout 2013 with modest improvement in 2014.
"The outlook is stable at the lower rating level due to a stable and capable management team, strong clinical reputation, strong and stable market share, solid track record of fundraising, and proven ability to operate with low operating margins," the report said.
Standard & Poor's in mid-October revised its outlook on Henry Ford to negative from stable, while affirming its A rating.