Moody’s Investors Service last week revised its outlook on $2.74 billion of Aa3-rated University of Pittsburgh Medical Center debt to positive from stable.

The UPMC system has a strong clinical reputation and is Western Pennsylvania’s leading health care provider, drawing patients from the greater Pittsburgh area and across the U.S. Revenue grew 4.3% in fiscal 2010 and 3.6% for the first six months of fiscal 2011, and UPMC has a history of tackling operating challenges.

“The positive outlook reflects our expectation that the system will continue to benefit from its notably strong fundamentals, generating solid operating performance which translates into strengthened balance sheet and leverage measures,” according to the Moody’s report.

UPMC grabs 55.7% of the market share in Allegheny County and 37% within the immediate 10 counties. Moody’s believes the provider has significant market opportunities to expand clinical reach and market penetration.

Credit challenges include a weak regional economy, a risky and less liquid investment portfolio than most academic medical centers, and large pension fund requirements. UPMC’s fiscal 2011 pension contribution was $135 million.

The health care provider has sold debt through the Allegheny County Hospital Development Authority, the Allegheny County Industrial Development Authority and the Pennsylvania Higher Educational Facilities Authority.

The system collected more than $8 billion in revenue in fiscal 2010 and has almost 50,000 employees.

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