S&P Global Ratings downgraded Community Health Systems Inc.'s corporate credit rating to B- from B.
The rating agency also lowered the issue-level rating on the company's senior secured debt to B+ from BB- and the issue-level rating on its unsecured debt to CCC from CCC+.
The outlook is stable.
S&P said the downgrade comes after a "poor quarter" of operating results, highlighted by a 2.5% decline in same-facility adjusted admissions and higher expenses for medical specialists, resulting in further EBITDA margin deterioration from already weak levels.
The agency noted that despite the progress in the company's asset sale program, Community Health's core business remains challenged, even after excluding facilities being held for sale. It also noted that the company has seen weaker demand over the past several quarters, though the magnitude of the slowdown was more pronounced for Community Health than its competitors, and that the company has struggled to reduce expenses in line with slowing demand.
S&P believes that the company's EBITDA margins are likely to remain lower and more volatile relative to health care service peers and revised its business risk assessment to weak from fair to reflect this risk.
The rating agency said the stable outlook indicates its view that the company will be able to generate at least slightly positive free cash flow over the next two years, notwithstanding leverage that is expected to remain above 6.5x.
S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.