Moody’s Investors Service downgraded Temple University Health Systems to Ba2 from Ba1 Tuesday.

The downgrade affects about $525 million in rated debt issued through the Hospitals and Higher Education Facilities Authority of Philadelphia.

Moody’s retains a negative outlook on the debt.

TUHS has suffered multiple years of significant and growing operating losses, wrote Moody’s vice president Beth Wexler and associate managing director Lisa Goldstein. The analysts expect operating losses to be significant in fiscal year 2013.

The analysts also worry about declining cash balances.

TUHS has weak leverage measures as exemplified by a weak peak debt service coverage of 0.9 times.

TUHS has also become increasingly dependent on funding from Pennsylvania, a dependence the analysts see as a negative.

The negative outlook is connected to ongoing pressure on operating performance and thin operating cash flow.

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