UofL Health, based in Kentucky, was downgraded to BBB from BBB-plus, by S&P Global Ratings, which cited sizable operating losses, low days cash on hand, and a reduced ratio of unrestricted reserves to long-term debt.
S&P's rating action was on debt issued by the Louisville/Jefferson County Metropolitan Government in Series 2022A and 2022B bonds. The new rating outlook is stable.
UofL Health has had thin days cash on hand since inception but this slid to 30 days as of June 30, S&P said. This was below UofL Health's budgeted expectations. However, UofL Health has a $50 million undrawn line of credit.
The downgrade also stemmed from continued operating losses in 2025 stemming from labor and wage pressure. The system continues to use temporary agency nurses and has staffing and start-up costs associated with the recent opening of two facilities.
The system is heavily reliant on Medicaid funding for revenues. S&P expects it will see a meaningful reduction in this revenue in 2028 because of impending cuts to the program.
For credit positives, UofL Health recently engaged a consultant to identify and implement structural changes to improve its operating margins on a sustainable basis, S&P said. The ratings agency expects "these efforts will yield positive operating margins in 2026, which we view as both achievable and necessary to avoid additional rating pressure."
The system' UofL Hospital is one of the leading academic medical centers in Kentucky, S&P said. It has the Louisville area's only level 1 trauma center and state's only comprehensive stroke center.
For credit positives, S&P noted the system doesn't participate in a defined benefit pension plan, does not have contingent-liability exposure and has no swap arrangements. However, it does have substantial long-term operating lease liabilities.
The UofL Health system had $435 million in debt outstanding as of June 30.
UofL Health didn't respond to a request for a comment.
Fitch Ratings
