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Ratings agency changes Steward’s credit outlook

Carney Hospital in Dorchester is one of the facilities operated by Steward Health Care System LLC.

Jonathan Wiggs/Globe Staff/File

Carney Hospital in Dorchester is one of the facilities operated by Steward Health Care System LLC.

Moody’s Investors Service said Thursday that it has changed its credit rating outlook for Boston-based Steward Health Care System LLC from positive to stable, warning that a “challenging operating environment” could slow the company’s financial progress.

At the same time, Moody’s affirmed Steward’s actual credit rating of B3, which a spokesman for the rating firm called “speculative grade” subject to high credit risk. If the rating were to be downgraded in the future, it would make it harder for the company to borrow money.

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“The change in the rating outlook to stable reflects Moody’s expectation that improvement in Steward’s operating results will take longer to realize than the rating agency originally expected given the challenging operating environment,” the rating firm said in a statement.

Moody’s statement said it expects for-profit Steward to “continue to operate with very high leverage and limited ability to repay debt through free cash flow” because of weaknesses in the volume of hospital patients and other factors. Slower operating improvements will also make it harder for Steward to repay debt over the next 12 to 18 months, it said.

“Moody’s has affirmed Steward’s existing rating in spite of a challenging operating environment facing all health care providers,” said Brooke Thurston, a Steward vice president. “Steward’s financials have improved, including demonstrating positive cash flow and reduction in debt. The company is in a stronger position than it was a year ago. For anyone following the health care industry, remaining stable in this environment is a success.”

Steward, which is owned by private equity form Cerberus Capital Management, operates St. Elizabeth’s Medical Center and Carney Hospital in Boston along with eight other acute care hospitals, a rehabilitation center, and a larger physicians group in eastern Massachusetts.

Robert Weisman can be reached at Follow him on Twitter @GlobeRobW.
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