Catholic Health Initiatives operates St. Luke's Hospital in Houston.
Catholic Health Initiatives entered the Texas market with the acquisition of Houston’s St. Luke’s Hospital in 2013.

DALLAS - Moody's Investors Service downgraded healthcare giant Catholic Health Initiatives' $8.3 billion of debt to A2 from A1 after a fourth year of declining operating performance, the ratings agency said.

The outlook remains negative.

The Jan. 26 downgrade followed similar action by Standard & Poor's on Dec. 15. S&P lowered its rating to A from A-plus and retained a negative outlook.

"The negative rating outlook reflects ongoing operating pressure, concerns over weakening liquidity, and modest debt measures," lead analyst Eugene Bradley Spielman said. "Failure to make timely improvement to consolidated performance measures, and to protect the balance sheet from further weakening, would likely result in a downgrade."

The nonprofit healthcare operator, headquartered in Englewood, Colo., attributed the $641 million operating loss to problems in some of its markets, particularly Kentucky. Other factors were high expenses for electronic medical record rollouts, costs of investments for health reform, including health plan development and physician integration.

CHI expanded into Texas in 2013 with the $1 billion acquisition of the St. Luke's Episcopal Health System. CHI invested heavily in strategic expansions to position itself for a new competitive environment under the current healthcare laws.

CHI was formed in 1996 through a merger of four national Catholic health care systems. The system operates in 19 states and includes 105 hospitals, long-term care, assisted-and residential-living facilities, and over 3,400 employed physicians.

In fiscal year 2014, CHI generated $13.4 billion in operating revenue, making it the third largest not-for-profit hospital system rated by Moody's. CHI's largest operations as measured by revenue are in Kentucky, Nebraska, Washington, Colorado, Texas, Ohio, and Iowa.

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