Elite College Credit Ratings Take Hit From Struggling Hospitals

Like other major universities, the University of Southern California has poured resources into expanding its health system. But it’s coming at a cost.

Moody’s Ratings downgraded USC a notch to Aa2 last month, citing underperformance from its growing health system. Similarly, the agency lowered its outlook for Emory University to negative in January, citing “current and expected future weak operating performance stemming largely from Emory Healthcare.”

The moves reveal a difficult reality: The medical complexes that burnish universities’ reputations and bring in significant revenue are also becoming a drag on financial performance. The credit impact on USC, a marquee school ...