Bond rating agency Standard and Poor’s this week dropped its long-term outlook for Eastern Maine Healthcare System, a move the hospital and health care network’s top financial officer said is “not warranted.”

The ratings agency reaffirmed its assessment that EMHS can make ends meet, but expressed long-term concerns about operating losses at the health care system’s flagship Bangor hospital, Eastern Maine Medical Center.

The outlook downgrade makes clear the possibility that S&P could follow credit rating agency Moody’s Investor Service in dropping EMHS’ credit rating to levels described as “speculative.”

“We believe if EMHS cannot improve and stabilize performance and cash flow at its individual hospitals, a downgrade would be warranted,” the ratings agency stated.

Another blow to the system’s creditworthiness could hamper it in issuing bonds, which it relies on to refinance old debt and to fund major construction projects, such as a seven-story tower at its flagship Eastern Maine Medical Center in Bangor. Investors may be less willing to loan EMHS money through those bonds or demand higher interest rates.

[Saving ailing hospitals created fiscal strain for Eastern Maine Healthcare]

But the system’s top financial officer said in a written statement that EMHS doesn’t plan to go back to the bond market for cash “in the foreseeable future.”

The hospital network said in response to the news that it looks forward to proving the negative outlook wrong, saying that its five-year strategy is “both innovative and forward-thinking.”

“We are building an enterprise-wide electronic health records system, organizing our more than a thousand employed providers into a single medical group, and continuing to advance our very successful population health model,” said EMHS vice president and chief financial officer Tony Filer in a prepared statement.

The ratings agency reaffirmed for now its “BBB” rating on bonds EMHS issued in 2013 and 2016.

Looking ahead, the ratings agency said it was concerned by “significant underperformance and an operating loss” at EMMC, and that it expects financial pressure to mount with the fall opening of a new expansion.

“The negative outlook reflects challenged underlying operating performance at several EMHS hospitals including its flagship, Eastern Maine Medical Center,” said S&P credit analyst Cynthia Keller in a statement this week. Performance throughout the entire system has been “below expectations,” she added.

EMHS showed some positive signs, too, with positive year-to-date net earnings, increased revenue from a restructuring of the network’s investment portfolio and payments from the state under MaineCare, the state’s Medicaid program, Keller said.

S&P said that it could downgrade EMHS credit rating in the next two years if earnings don’t “progress toward break-even levels,” but it noted that the system has similar characteristics to more highly rated health care systems.

Darren Fishell

Darren is a Portland-based reporter for the Bangor Daily News writing about the Maine economy and business. He's interested in putting economic data in context and finding the stories behind the numbers.