Children’s Hospital Los Angeles (CHLA), the largest pediatric provider in California, has now been downgraded by Moody’s for the second time in 2025. The ratings agency warned of a material decline in liquidity and operating performance, placing the hospital under review for another potential downgrade.
Credit downgrades increase borrowing costs, limit access to capital, and make it harder for hospitals to maintain services, expand facilities, or invest in patient care. The credit rating agency explicitly cited CHLA’s heavy reliance on state funding and Medicaid exposure as a key driver of the downgrade.
Moody’s points directly to heavy Medicaid exposure and reliance on state funding, conditions made worse by Governor Gavin Newsom’s decision to divert limited healthcare resources away from California hospitals. Under Governor Gavin Newsom, California expanded Medicaid to all illegal immigrants despite the state’s massive budget deficit, struggling hospitals, and lengthy wait times for medical care.
This is just another instance of recent major credit downgrades for health systems in California. In November, Moody’s downgraded Fresno’s largest hospital system – Community Health System. In October, S&P Global Ratings downgraded Palomar Health in San Diego County.
“California families are paying the price for a governor who has lost sight of his first responsibility: taking care of his own people,” said Defend Forgotten America President & CEO Jenn Pellegrino. “Gavin Newsom is putting illegal immigrants first and California patients last. He’s draining Medicaid funds from hospitals that care for the most vulnerable, while chasing headlines, pandering to the radical left, and plotting his presidential run. California’s healthcare system is collapsing, and Gavin Newsom is making the crisis worse.”
