Fitch Ratings said Wednesday it has downgraded Hartford-based Connecticut Children’s Medical Center’s credit rating, citing continued operating losses, liquidity pressures and a challenging payer mix.
Fitch downgraded CT Children’s issuer default rating, which evaluates the overall creditworthiness of an organization, to “A” from “A+.” The rating agency also assigned a stable outlook, indicating it does not expect further changes in the near term.
While the A rating is still within the investment-grade category, it can increase interest rates for debt and raise interest expenses.
The downgrade reflects “an operating loss and a weakening in unrestricted liquidity” in the hospital’s 2025 fiscal year, which ended Sept. 30, the agency said.
CT Children’s confirmed Thursday that it posted an operating loss of $18.3 million for fiscal year 2025, a -2.8% operating margin.
Fitch said the weaker-than-expected financial performance was driven by persistent margin pressures across the hospital sector, including higher labor costs, inflation and reimbursement challenges. The report also pointed to reduced liquidity and balance sheet strain, limiting CT Children’s financial flexibility.
Another key concern it cited was the hospital’s high reliance on Medicaid — which provides 56.6% of its gross revenues and typically reimburses at lower rates than commercial insurance — putting added pressure on revenue. A hospital spokesperson said Medicaid payments covered only 52% of CT Children’s costs.
Despite the downgrade, Fitch highlighted several strengths, including the hospital’s leading role as a pediatric provider in Connecticut and its importance as a regional healthcare resource.
In a statement, a spokesperson for CT Children’s acknowledged the rating change.
“While a downgrade is not the outcome we aim for, this action was anticipated given the broader financial pressures facing children’s hospitals nationwide, including ongoing Medicaid underpayment and rising costs,” the spokesperson said.
The A rating still reflects the hospital’s “strong investment-grade creditworthiness,” the spokesperson noted, while also highlighting that its outlook was improved from negative to stable, “which we believe shows confidence in our long-term stability.”
Fitch said the stable outlook reflects expectations that the hospital will gradually improve its operating performance and maintain adequate liquidity through management actions such as cost controls and strategic initiatives.
It also said that, while underlying operations remained slightly negative in the first quarter of 2026, improved philanthropy resulted in a positive bottom-line performance.
Fitch said that fundraising — including a $50 million lead gift announced in October 2025 — is expected to help CT Children’s reach its $250 million campaign goal in the coming years and stabilize its balance sheet as it completes a new clinical tower and implements an operational turnaround plan.
The hospital opened its $326 million clinical tower on Dec. 4.
Shannon Sullivan, CT Children’s new CEO who started in January, shared the hospital’s improvement plan with Fitch, who said it believes “the plan is achievable within two years.
The agency cautioned, though, that continued operating losses or further liquidity erosion could put additional pressure on the credit rating.
