A credit rating for Northern Light Health dropped on Tuesday, the latest blow for the struggling health care system.
The health system’s rating from S&P Global is now BB-, which is a drop of three grades from October, the global rating firm said Tuesday. Northern Light was at BBB- rating in October.
There is a negative outlook to the rating. A BB- rating means the health system is “less vulnerable” in the near future but has “major ongoing uncertainties to adverse business, financial and economic conditions,” according to S&P.
The drop followed other credit downgrades for the health system over the past year. In March, Northern Light was at a BBB rating, four grades higher than the current rating. Moody’s Ratings has also downgraded Northern Light’s credit rating in the past year.
The decrease is a sign of “persistent operating losses,” S&P Global said.
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.
The rating is in part because Northern Light had debt service coverage covenant violations in 2022 and 2024, S&P said. The health system failed to uphold its end of a contract. The system had $630 million in outstanding debt at the end of fiscal year 2024.
A further downgrade is possible if Northern Light does not have financial improvement, not including one-time payments.
Northern Light is “certainly disappointed” in the drop but has made changes to improve operating results and manage financial difficulties, spokesperson Suzanne Spruce said. Like other hospitals, Northern Light is dealing with a staffing shortage and higher costs for goods and service.
The health system has established “new partnerships” that help reduce costs, she said. In 2023, it contracted with Optum to outsource administrative jobs. The health system needs to repay roughly $100 million still outstanding of a large advance from Optum.
There was not a covenant violation in 2023 because of the lump sum from the partnership, S&P said. A violation in 2025 looks unlikely as Northern Light has deposited $11 million in escrow and plans to add the same amount in April.
The health case system has “light” unrestricted financial reserves and relies on third parties and lines of credit for cash flow to pay its obligations.
Northern Light is making “steady improvements” from its prior performance and making structural changes that “transform how we deliver care,” Spruce said.
“We are dedicated to finding solutions to ensure we are here for decades to come making health care work for the people of Maine,” Spruce said.
