Sangerville

Credit agencies downgrade Northern Light’s rating

By Kathleen O’Brien, Bangor Daily News Staff

Two credit rating agencies lowered their scores for Bangor’s largest health care system last week due to its substantial financial losses in recent years. 

Though Northern Light Health had a $2 million deficit in 2023 compared with losing $178 million in 2022, credit rating agencies S&P Global and Moody’s each lowered the provider’s rating one notch based on years of operating costs outweighing revenue.  

The score changes mean Northern Light may pay more interest on loans in the future, which would increase capital costs of future investments. 

Northern Light Health operates Bangor’s Eastern Maine Medical Center and nine other hospitals throughout Maine. The Brewer-based system also employs more than 10,500 people and is Penobscot County’s largest private employer.

Despite the downgrade from the two agencies, the heath care system said it expected the changes and stands by recent expansions that haven’t helped its years-long financial woes brought on by the pandemic. 

Those pandemic-era losses largely stem from establishing large COVID-19 vaccine clinics, raising staff wages to remain competitive in a tight hiring market and relying on pricey traveling nurses to fill vacancies. 

S&P Global lowered Northern Light’s rating from BBB, which means that it has enough capacity to meet its financial commitments, but adverse or changing conditions could threaten that ability, to BBB-, which is considered the lowest investment grade.

The agency also stated Northern Light’s outlook is negative, which reflects S&P’s belief that the provider’s persistent operating losses have “provided limited flexibility during this period of earnings and cash flow stress,” the agency wrote in a statement. 

Moody’s, meanwhile, downgraded Northern Light’s rating to Ba2 from Ba1, indicating the agency believes the provider has substantial credit risk, largely because it’s carrying $586 million in outstanding debt, according to a statement from the agency. 

However, Moody’s revised Northern Light’s outlook to stable from negative. This is because the agency believes Northern Light will have cash from one-time funding on hand for more than 65 days, “allowing for some stabilization as management works toward operating performance improvement.” 

To control costs over the past few years, Northern Light has closed and consolidated locations, outsourced positions and sold hospital labs to a national company, among other operational changes. 

Alongside those cost-cutting measures, the provider also expanded Acadia Hospital, one of Maine’s two private psychiatric hospitals, to add 50 more behavioral health beds, said Suzanne Spruce, a Northern Light spokesperson. 

The health care system also “replaced antiquated facilities with two modern hospitals in Blue Hill and Greenville” and consolidated care at Northern Light Mercy Hospital in Portland, Spruce said. 

“Despite the unprecedented financial climate, we took these actions because we knew it was the right thing to do for the rural communities we serve and the people we care for,” Spruce said.

Get the Rest of the Story

Thank you for reading your4 free articles this month. To continue reading, and support local, rural journalism, please subscribe.